Crunch time - real test coming onYes AZL lost 5 pips to finish...

Crunch time - real test coming on

Yes AZL lost 5 pips to finish on 8.9c. Our volume was moderate, in similar range to yesterday, just under 53.3m shares traded. The range around high 8s has acted as a good support before, lets hope it does that again.

ASX Li stocks were also weak. Of the 54 stocks that I track, average loss was 1%. Stocks had a much larger drop in the morning, but many crawled back. so although we lost, an average loss of just 1% was good for a very weak day like this.

Overnight US Li stocks were also weak. Most stocks including ETF of LIT lost around 1% (similar to us), but some other stocks lost up to 5%.

What next -

Yesterday US indices were weak and lost between 0.5% to 1.25%. This was after 4 days of gains. Accordingly stocks were weak as well. ASX has been mirroring US for last few days but fell just around 0.2% today..

So now most resource stocks have had 3 days of decline. a pullback many said we had to have. So that part is fine, but the big issue is Indices have only pulled back 1 day (eg US first loss after 4 green days). So its a peculiar situation where stocks have fell for 3 days and indices only 1. What happens if indices feel the pullback is not enough, what will stocks do? I would have been very happy if both indices and stocks had made 3 day decline, but we are not in that situation. We have reached a crunch time - a test of this run - whether this will continue or as many said this is bear market rally, and now we decrease more.

There are 2 other negative factors in play. A few of US indices fell below their 200 day moving average - many fund managers are blind sellers if that happens. Also historically September is weak month for US indices, which is not far away.
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Personally I have also reached the crunch time. Stocks are looking weak. Though the 2 indicators I wanted to be in favour, are actually still in favour. SP 500 is above 4200, at 4274 and Volatility index VIX at 19.90, below 20. Will the indicators fail me, by still being positive but stocks losing steam, or will stocks get back gradually if indicators stay in favour?

Usually when there is no bad news and stocks consolidate and drop, it usually lasts 3 days (but this is probability, no guarantee). We have now lost for 3 days. Probability says we should stabilise and not drop further. But when weakness happens, everything looks crumbly.

So what will happen tonight? US Futures are in moderate red. Asian markets were largely red, but below 1%. Volatility index VIX is 19.9 - so all right. Yesterday also it reached high 20s before retreating. Announcements - Manufacturing Index, House Sales, Euro Inflation rate, earnings report, etc. Cryptos are in panic mode. Like our stocks, they are also very jittery. Bitcoin below 23.4k - big drop. So what does this say? It looks like another red day overnight. The best case for us is its not a big red. Then there is a chance 3 day drop rule may work - we could drop tomorrow morning but recover most by end. Or US go green. But that's on a good path. Bad path? Lets hope we don't have to think about it. all the best.