Testing the pullback - repeat of yesterday
Yes AZL lost 6 pips to finish on 9.4c. Our volume was comparatively good, just under 64m shares traded. We have gone below our current trading range. Hopefully its an incursion which can last a day or 2. So hopefully if market recovers tomorrow, we are back in double digits.
ASX Li stocks were also caught in this pullback. Of the 54 stocks that I track, average decline was 3.5%.
Overnight US Li stocks were mostly down. Though some stocks including ETF lost 1%, some other stocks lost upto 5%.
What next -
Yesterday US indices played well and were in green. Dow Jones also crossing 200 moving day average. Next is SP 500 - its around 4310, less than half percent left to cross 200 moving day average. ASX mirrored once again US indices and finished in green.
On the weekend I had written that a lot of analysts are calling for a pullback. I repeated that yesterday in my notes. Today seemed to be like a repeat of yesterday - nearly. Indices were in green but most resource stocks I follow were retreating. There was a near panic in the morning and many stocks retreated a lot. But most stocks came back from their bottom of today and finished a bit better. But the pattern was similar - Indices green, resource stocks red.
So 2 days in a row we are seeing the pullback. No bad news. All the indicators moving in positive direction. So why are punters panicking? I feel its normal. Most stocks have made decent gains from their June bottom, many gaining over 50%. Analysts have been calling on the weekend of a pullback, even bulls - calling it healthy (though didn't look pretty today). So based on history, this happens. May-June we had big drops, and anytime market drops a bit, people remember the bad days. And the fear creates more fear. But who knows, there are lot of die hard bears who have not given up. they are calling drastic drops. So maybe those who are panicking and exiting are doing the right thing. So there is always two sides of the coin. Bottom line is no one knows what will happen. Individual risk-reward to guide each individual.
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Personally it was same dilemma as yesterday. On the weekend after reading a lot I came to the conclusion that there is a very high chance of pullback. I was thinking like yesterday whether ease a few stocks. But on the weekend I had decided that if the indicators are positive, then I will hold. SP 500 is around 4310 - well above 4200. Volatility index is at 19.69 - still below 20 - both positive indicators. So I am still there. But there is a bit of fear and in last downturn in May-June, I sold over 50% of my shares as they started dropping. So why I am not selling now? Like I said yesterday, I feel we are in an uptrend. Probability is better that in short term we may be ahead, but this is something to be evaluated everyday and any action taken immediately.
Another worry point is that the track record of September for US stocks is not good. It has mostly been a weak month. something to keep an eye on whether it will repeat again this year.
So what will happen tonight? US Futures are flat. Asian markets were well in green, except Korea. Volatility index is at 19.69, looking good. After being very tentative yesterday, Cryptos seem to be in a happy mood. Bitcoin now well above 24k and surging as I write. Our friend Oscar is bullish. Only one key data tonight - Retail Sales. So what does all this say? At this stage its looking positive. Lets see if SP 500 gets above 200 moving day average. So what do I feel? Unless US indices do a big red, I think we are near the end of the pullback. Usually it can last 3 days. We have done 2. So tomorrow could be last or we may have seen bottoms today. This is just my thought and I could be wrong, so please dyor. Will that happen? Lets hope so. All the best.
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