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The weekly Q&A Report answering subscriber questions throughout the week
The ASX200 can’t make its mind what to do, should it follow the Dow, NASDAQ or Europe and so far the conclusions been “if in doubt do nowt”. Coming into today the markets up just 3-points for the week, for all its bluster and major stock / sector rotation the underlying index continues to go nowhere fast. Yesterday summed up most of 2021 as we opened marginally higher which attracted sellers, this drove the market down over 100-points from its high before the weakness attracted buyers to push us all the way back to unchanged.
Another choppy day for the ASX with one way traffic on the sell side for the morning before a midday low and a reasonable rally into the close before finishing flat. The ASX sell-off early was an anomaly from a regional perspective with Asian markets remaining flat as did US Futures however that didn’t last long and we saw some reasonable buying in the second-half of the day.
MM added to our frustrating position in Newcrest Mining (NCM) yesterday, hopefully we aren’t throwing good money after bad! The gold price has corrected almost 20% since the euphoric period last August and as we’ve seen this year when markets become too optimistic watch out and vice-versa.
As MM keeps saying “selling strength and buying weakness will add value in 2021” and gold certainly ticks the box of the later. I wont go into the fundamental reasons why we are bullish gold around the $US1700 area as its covered very succinctly by Rocky in the video contained and we share those views, but the technical picture is also supportive with silver remaining on track to make fresh multi-year highs above $US30/oz.
The ASX opened better than it closed today with the 6800 level on the ASX once again providing an impenetrable barrier. The early high of 6806 was made 20mins after the open and the rest of the day was one way traffic before we eventually closed at 6714. There was a clear move out of the recently strong banks, resources & energy today, back into growth, however it was far from convincing while overnight buying in Gold saw the precious metal stocks do pretty well.
We are making some amendments across all MM Portfolio’s today, inline with recent changes in the Macro backdrop as discussed in recent notes.
The ASX200 continues to struggle whenever its steps foot above the 6800 level with yesterday another perfect example, the index was up strongly at midday only to surrender half of its gains even as US futures rallied strongly. This time we saw some reversion from value back to growth, for example BHP Group (BHP) reversed lower while Afterpay (APT) bounced very strongly from its intraday lows.
The market ended up today although again, it was a long way from the daily highs as traders sold the move above 6800 – seems a similar sort of story we’ve been writing about for the past 5 weeks. Today however, there was a change in the way the market is treating ‘growth’ with a capitulation style sell-off early met with buying and a clear rotation back into that part of the market. This is aligned with MM’s recent calls for some reversion to play out here i.e. buy growth in the short term – more on this below.
The ASX200 put in pretty disappointing performance yesterday only rallying +0.4% after receiving a plethora of apparent bullish news, almost 60% of the index managed to close up on the day but as we’ve seen so often this year sellers emerge into strength – the index has now been rotating round the psychological 6800 area for 5-weeks with both sellers and buyers fading any moves. Sentiment was tarnished by some aggressive selling in the BNPL space with both major players reversing early gains to close well in the red, ZIP (Z1P) was the worst falling -6.7% while Afterpay (APT) retreated -3.6%; the sectors currently reinforcing our view for 2021 that selling strength will add value in the months ahead.
Today’s session promised so much at the outset but delivered so little with the ASX 200 finishing ~100pts from the early morning highs. The bullish backdrop of what looked to be a short term top in bond yields, the passing of a US stimulus package + positive data from China over the weekend had stocks well bid on open with the market trading up to a 6835 high, only for sellers to kick into gear around lunchtime and push stocks back towards 6700. The performance gap continues to open for the market with the IT sector down -1.14% today while the Materials rallied +1.65% showing that the right sector calls are so important in this sort of market as the macro backdrop plays the tune for stocks.
