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A flat day on the surface but there were plenty of moving parts underneath seemingly with little rhyme or reason to much of the daily swings. The banks were strong, offsetting weakness in telcos and energy. Tech was also though it was hardly a broad-based rally within the sector. There seemed be a short squeeze focus today with the beaten down names rallying without news.
The ASX200 enjoyed a noticeably strong match-out yesterday in what had been a fairly lacklustre session, the market finally closed up +0.5% showing a current lack of appetite to go home short, it’s feeling like a classic “bear squeeze” i.e. just what MM has been looking for since mid-June. To back up our opinion the recent stock/sector rotation back into the underperformers of 2022 reaffirms our view that we’re seeing capitulation by bearish traders as opposed to a meaningful change in trend i.e. a quick glance at yesterday’s 5 best performers and their performance through 2022 paints a very clear “short squeeze” picture:
While the ASX was only up ~0.5%, the session had a more bullish vibe to it with some big moves at the stock level as news flow heats up ahead of full-year results. The tech sector shone bright, and so too did the telco’s while the energy stocks struggled on weaker oil prices overnight and some confusion around Woodside’s guidance at their quarterly today.
The ASX200 surged higher on Wednesday following a strong lead from Wall Street as traders appeared to bet that we’ve seen a meaningful bottom by equities i.e. the S&P500 has corrected -25% and the ASX200 -16%. There were a couple of catalysts for the strong rally by the broad market including good old fashion company earnings which are starting to paint a picture that businesses are coping far better with the macro headwinds than was previously feared i.e. investors are expecting boards to mention inflation, Covid and supply chain concerns leaving relatively little left to scare the market, at least for now:
Finally, the ASX popped on the upside just as the BofA’s latest survey of fund managers showed a ‘dire level of investor pessimism’ with the title of the report authored by their Chief (normally bearish) Strategist Michael Hartnett a very fitting way to describe the current mood of markets…’I’m so bearish, I’m bullish”. Money was desperate to get back into risk assets and equities caught a bid today as a result. The small cap index finished more than 2% better today while the ASX200 had its best session since the early days of the new financial year.
We are buying XOM US & FCX US, using 700 HK as a funding vehicle
Our Research Lead made a comment yesterday that the “markets changing its tone like a cut snake!” as yet again on Tuesday we saw the relative sector performance reverse from the previous few sessions following the hawkish RBA minutes which sent investors back into “risk off” mode however I replied with “Remember your time frames H!”, this brief conversation resulted in today’s title and opening few paragraphs as we focus our efforts on optimum portfolio composition for the quarters and years ahead, not just a few days/weeks! The ASX200 is in the midst of its 6th week of rotation around the 6600 area i.e. anyone getting too…
While stocks opened marginally lower, it was the RBA minutes from the last board meeting + Deputy Governor Bullock delivering a speech, both of which signalled sharply higher rates that prompted sellers to kick it up a notch, the IT stocks felt the brunt as did healthcare, two sectors heavily influenced by interests rates while Energy, on the other hand, keyed off a 4.6% rally in Crude prices overnight
The ASX200 enjoyed a strong Monday taking its lead from US indices both on Friday night and the S&P500 futures during our day session i.e. the broad-based US index rallied +1.9% on Friday and the futures were up another +0.7% when the ASX closed yesterday. The buying was broad-based on Monday with over 75% of stocks rallying as “risk on” was clearly the theme of the day with the IT, Resources & Energy Sectors all rallying by over 2% – at least one day this week when the local market followed the MM roadmap! The big news yesterday was ANZ’s acquisition of Suncorp’s bank for $4.9bn which in our opinion added further credibility to yesterday’s advance:
A solid session to kick off the trading weak with the ASX choppy early on before finding its groove around lunchtime and rallying strongly, closing on its high. The risk sectors rallied with Tech, Materials & Energy all adding more than 2% while the defensive areas were used as funding.
