AZL Daily Report, page-46

What can stop the downtrend?

So tomorrow we should know what is in store. Have not yet read if some already know what it is - will catch up later. Hopefully its a good one..

ASX Li stocks were not in good mood and many stocks dropping big. Of the 54 stocks that I track, there was average loss of 2.5%. Another real test of the sector, similar to June low looks like happening.

Overnight US Li stocks were in a bigger fall, dropping average over 4%.

What next:
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SP 500 which early pre-market looked green, soon lost its mojo, overtaken by bears. It was pushed to touch 3800, recovered slightly but still finished close to 1% down at 3817. ASX was in meltdown and lost close to 1.5%. It had small loss early in the morning, not sure what, but looks like Bank of Japan policy change has spooked a number of markets and dropped big later in the day.
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So SP 500 now has lost 7% from its high of 4100. There was a talk of drop of around 20% from there, most common level for bottom at 3100/3400 (average 3250). At this stage it looks like it is steadily moving towards that. All this time there was talk of Inflation. Last few numbers for Inflation has been decent. So those who wanted to continue the pessimistic feel, they have now shifted to recession talks. Yesterday I said first number for SP 500 on downside was 3810, it went below that but finished above. Next one is 3750, crossing that we may suddenly find us in mid 3600. Upside, we need to gain 3900 though there are some other numbers before that. Next 4000 - this is a very crucial level for any chance of a bull run.
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From indicators perspective, till now everyone was saying there is strong co-relation between SP 500 and indicators like Yield, Dollar Index, VIX. Now that SP 500 is falling big time, but VIX or Dollar Index is not gaining, many are saying co-relation is lost. Or some other vague reason. Everyone has a theory - After The Fact. Its so easy to justify any thing happening in market - both up or down.
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As I have been saying after double top 4100, the chances of that final bottom has increased considerably. Markets could fall another 13-15% average taking us to that zone. But it may not happen in a straight line. There should be some bounces, but bears at this stage are firmly in control and don't want to give up.
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So what will happen tonight? As I said yesterday, although many are expecting a Santa Rally, in bear market years like 2022, Santa usually gives a miss. So it seems that it is not just us mortals who fear the big bad bear. But markets don't go up or down in straight line. We have 4 down days with SP 500. Some say it takes 5 down days to get a bounce. US Futures are already on a decent red now. At this stage its best not to expect anything but follow price action - possibly be defensive. But technicals do point towards a bounce, though it did yesterday as well but we didn't get one. We still have few days to Christmas, so there is a still a chance of a bounce, not sure of a rally. Will that happen? lets hope so. All the best.