Are we on a Bull Run or a Bull Trap?
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Yes AZL gained 7 pips to finish at 7.4c. Our volume was very good, best in around 6 weeks or so, just over 29m shares traded.
Well, what was that? I have been saying for last few days that our volume is drying up, we are trading in a very small range - these are signs of bottoming. I don't know what triggered today's buying, but I had felt it could happen, so was keeping a close eye. Same thing happened with another stock I write just a few days back. So I was looking for a break above 7. But someone gobbled up 7/7.1 in one go. I started buying from 7.2 to 7.4 (average just over 7.2). Bought a fair few, just from a technical break out perspective, hoping this is the run we have been waiting for. Although anything can happen, but this is the best move in 6 weeks or so - lets hope it continues. If it does, I feel we will be in 9s shortly - don't think we will trade in 8s much - lets see. Also please check for yourself as markets are volatile.
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ASX Li stocks were mostly positive and in happy mood, though not dancing at this stage. Of the 73 stocks that I track, average gain was around 2%.
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Overnight US Li stocks were also up but not much, average increase was around 1%.
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What next:
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Yesterday I had mentioned that we have had 2 good green days so there was a chance of going sideways, but was hoping bulls may continue their march. As expected, it finished sideways, but close to day's high at 4016. ASX though lost a little bit more - around 0.3%.
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As I mentioned yesterday, So SP 500 has crossed the first hurdle, finishing in 4000s. It has now finished a key moving average for 2 days in a row. This is the best move from a bullish perspective that has happened in over a year. So no doubt there is lot of excitement out there among bulls and investors. But along with excitement, there is some anxiety as well - we made multiple moves in 2022, all giving hope that we are going to finally go up - but all of them fizzled out. That memory is still fresh in the minds of many, and the question - will that happen again?
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Lead indicators still good - Yields fell yesterday, Volatility Index VIX fell and Dollar Index no major move.
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I mentioned few things which bears are calling out to press their case. That side of crowd is becoming more vocal that this is a bull trap. First of all, the charts of 2022 are matching very, very closely with 2002 crash and 2008 crash. Both times after few failed attempts of crossing the trend line (same as we failed in 2022 three times), finally in both cases they moved up, just like we have done now. But that was the final move before the crash. After this point in 2008 SP 500 fell around 45% and in 2002 around 35%. Analysts/chartists - they all like patterns, and they have found a strong one.
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The other key bearish case is divergences being found between different indicators. A big one is that this current rally is fuelled by dumb money - the retail. The smart money - institutions - are buying normal and have not stepped up.
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Most bear pundits believe that if we start crashing, it should happen within a week - in the next 3-5 trading days. Something to keep an eye on.
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From a bullish perspective, its looking good. Market is rallying. Economy is looking good - inflation falling, economy still holding and currently by all measurements its not in recession. Earning are said to weaken but they all still looking strong and holding up. Jobs holding well. So there is a chance that we may find 2023 to be different from 2022. We may continue to rise from here. And there is a chance, that we may be different from 2008 and 20002. And we do not have the big fall. As great Mark Twain has said "History doesn't repeat itself, but it often Rhymes". So we may rhyme like 2002/2008, but we may not repeat. I am hoping it is this way and lop of optimism is there for this theory - but markets are volatile and savage, so please dyor.
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Personally I have been cautiously adding positions across a number of stocks since Monday but mostly around those looking to do well - so stock picking rather than going for general sector etc.
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So what will happen tonight? US futures are in some red. Microsoft earnings - initial reaction was good, but now it is falling. Asian markets were largely green except ASX. but not very big rise, similar to ASX. Cryptos are panicking a little - now below 23k and fallen quite a bit but recovering now. US GDP data tonight along with jobs etc. Many earning reports. All this will provide direction. Also technicals and sentiment could become key - markets at critical level and big fight between bears and bulls - sometimes this tenterhooks situation are very volatile. We have 2 big green days, 2 days above 4000. Next critical level is 4100. Not sure whether its tonight, but we need to cross that in near term to keep the momentum. Lets hope 2023 is different and markets will get respite. Today a finish above 4000 will still be good, but a test of 4070 or even 4050 will be bullish
. Will that happen? Lets hope so. All the best.
(20min delay)