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The ASX200 again succumbed to selling into early morning strength as we followed US S&P500 futures lower throughout the day, considering their 0.4% decline by 4pm AEST a small 0.1% dip by the local market was fairly encouraging, especially as iron ore plunged almost 8% at one stage weighing on both sentiment and related stocks. Fortunately from an index perspective the influential banks were strong and 40% of the market still managed to close in positive territory. The markets look and feel remains the same which is no surprise considering the ASX remains unchanged…
The ASX was again looking optimistic early on as SPI Futures debunked overseas weakness but true to recent form, key resistance as detailed on the daily chart below provided an impenetrable wall that capped the markets gains, and as US Futures tapered off we simply trickled lower throughout the afternoon.
The ASX200 faded away yesterday following a common path over recent weeks, every time the ASX200 knocks on the 7475 door it gets sold off, no longer surprising or new – at yesterdays close the local index had only bounced 4% from its October low compared to the US S&P500’s impressive 10% rally to fresh highs. The US feels like it’s now due a rest posing the question can we buck any weakness after ignoring the strength, it does happen sometimes. The problem was 2-fold yesterday:
Another session where the ASX was looking strong (ish) however hit the skids at key resistance and sold off into the afternoon. Sector rotation again to only real game with the batten changing daily, Yesterday Energy led the line on the upside while IT was weak, the opposite played out today plus the heavyweight financials also copped some selling.
The ASX200 again faltered at the 7475 level yesterday, from a technical perspective the pictures getting clearer by the day – when / if the ASX200 closes above 7475 it’s a great buy targeting fresh highs with stops under 7440, excellent risk / reward for the trader. However at MM we are “Active Investors” and as such we’re more focused staying fully committed to stocks until we lose our bullish stance and advocate moving further down the risk curve. The price action yesterday felt more like a lack of buying into strength as opposed to meaningful selling as a number of stocks, courtesy of low volumes, swung around in a fairly exaggerated manner for a day when the index fell less than 0.1%:
A fairly lacklustre start to the week with the ASX chopping around par for most of the session as sellers seemed intent on defending the 7475 resistance level we’ve written about in our last few notes. SPI Futures were pricing a breakout to the upside today, but alas, that didn’t prove to be the case as weakness amongst the IT & Healthcare sectors weighed on the broader market, while only the energy stocks made any decent headway.
Australian stocks are knocking on the door of our technical breakout level and as subscribers know we believe fresh highs are likely into Christmas, our best guess is around 5% higher. However subscribers also know we like to look into the future, especially in today’s rapidly evolving market – its amazing what the ASX has already delivered in 2021 e.g. BNPL stocks moved out of favour while lithium returned back to the limelight, crude oil surprised everyone on the upside but iron ore halved in a few weeks while bond yields had some of their most explosive weekly moves in history. What we feel comes next is both exciting and potentially scary for those not prepared.
The AX200 rallied almost 2% last week as bond yields fell even after the RBA abandoned its “yield curve control policy”, the impact is going to be felt by many homeowners with fixed rate mortgages already being hiked this week e.g. St George’s fixed 3-year increased from just over 2% to 2.39% courtesy of the RBA no longer anchoring local 3-year bond yields to 0.1% plus for good measure they’ve started to prime the market for potential rate rises in 2023.
A choppy start to the week ended with 3 solid sessions of gains for the ASX, today it was the Communications sector leading the charge while the IT stocks lagged. For the week, the market added 1.17% with all sectors bar Energy & IT booking gains.
The ASX200 rallied 0.5% on Thursday as the Financial & IT Sectors teamed up to drag the index towards fresh 4th quarter highs, it doesn’t feel like it but we’re now only 2.7% away from new all-time highs and its slowly starting to feel like when, not if, we reach that milestone. The stock and sector rotation might be dominating the tape day to day and week to week but there’s a distinct absence of sustained selling unless a company, or sector, receives some meaningful bad news e.g. Dominos (DMP)…
