Rebound momentum lost?Yes AGE finished 3 pips down on 5c. Our...

Rebound momentum lost?

Yes AGE finished 3 pips down on 5c. Our volume was similar to yesterday, just over 38m shares traded.

ASX U stocks lost a small ground. Of the 25 stocks that I track, average loss was 1%.

Overnight US U stocks were in a good mood and made decent gains. The ETF and many other stocks made an average gain of around 5.5%. Its a pit ASX U punters chickened out and did not keep the momentum from US punters. This was a moment to start decoupling from general markets and ASX punters were not up to it. An opportunity lost. The U Futures declined by 20c to finish on $49.20.

What next -

Yesterday I had said that there was a 50/50 chance of a rebound happening from June bottom of SP 500. The US markets were of to a great start and at one stage SP 500 was up by 1.5% but lost the battle soon to bears. The first mild resistance was around 3710 level and a firmer resistance at 3740. The army of bears were in full strength around the 3710 mark, and it went up to 3717 before being pushed down well below June bottom of 3636. It reached 3623 then rallied a bit to finish on 3647 - slight negative for the day. ASX was red for the whole day, finishing half percent down.

So SP 500 has now done 6 days of red. Also 6 days of lower lows and mostly higher lows as well. It cannot get more bearish.

Of my reading, here are the two scenario where most analysts feel may happen around SP 500 (Please DYOR as this is just my readings/thoughts and I could be wrong);

One common theme among most analysts I have found is that:

• Stage 1 - very shortly we will do a short term bottom - either by end of this week or early next week
• Stage 2 - Then we will have a rebounce, which could take us up to 3800 but definetly below our key figure of 3900 - till mid-Oct
• Stage 3 - Then we may have a big fall - till Oct end/early Nov - this may be our final bottom
• Stage 4 - Then we will rise from end of Oct/early Nov for a hopefully big and sustained rally leading up to elections, Christmas and early part of next year

Scenario 1 -
Stage 1 - short rally around early 3600 where we are flirting for last 3 days.
Stage 2 - rally towards 3800
Stage 3 - bottom around 3500
Stage 4 - rally towards 4000s

Scenario 2 -
Stage 1 - Short term bottom around 3500/3520, now some are even calling high 3570/3580 (So roughly 2 to 4% down from here)
Stage 2 - rally towards 3800
Stage 3 - bottom around 3100 to 3400 (average somewhere in 3200 something. This is the low which has been called by most bears since March)
Stage 4 - rally towards 4000s

Yesterday I felt that there is 50/50 chance of each scenario. Hence tentatively I bought 40% of my funds available. I was hoping Scenario 1 will play out. Yesterday SP 500 made a really good attempt but fizzled out. Today that probability has dropped to 20/80 - so now only 20% chance that we may rebound from here. 80% chance of Scenario 2. I have held to my shares but did not buy more today. Reason being even if we drop now, its 2 to 4%, so could be short and sweet bounce. If 3500 level does not hold then its another story - that would be very hurting for a lot, but probability is not high at this stage. I will exit then. If 3500 level is seen to be holding, then I will buy more from my funds and play for the October bounce.

So what will happen tonight?
US futures in moderate red at this stage. Asian markets all red - huge drops in some countries 2 to 3% - looking very grim. Volatility index VIX in real danger zone - finishing at 32.60 after crossing 34 yesterday. Extreme Fear (35+) and capitulation (40+) is just round the corner. The only positive about capitulation is that it also marks bottom. The strength and bravado which cryptos were showing is now gone, have been brought down to earth. Bitcoin below 19k now, but still trying to hold. Further increase in 10 year yield, another 2.2%. Dollar only slightly losing strength. So more bearish indicators.

Another few economic data but most importantly Powell speaks at 12:15AM our time after market opens - lets see what he has to say more. So we are missing our bounce for last 2 days. There is a chance there is a big drop in 3500s tonight and bounce happens tonight itself (likely is towards the end of week). I would love to see a big drop and then bounce back - want to get done with it. Will that happen? Lets hope so. All the best.