AZL General Discussion, page-12783

Is the rise for real?

Yes AZL gained 2 pips to finish on 7.7c. Our volume was still on the lower side, but similar to last few days, just over 8.5m shares traded.

ASX Li stocks were tentative throughout the day. Of the 54 stocks that I track, there was no gain or loss.

Overnight US Li stocks had a decent rise on the back of gain in indices, average gain of just over 4%. Pity that ASX Li punters were so defensive.

What next -

Yesterday US indices had a wild day which everyone must be aware by now - swing of over 5%. Indices gained close to 3%. ASX also was in good mood, gaining around 1.75%. But most resource stocks I follow were not buying that - asking the question - is it a trap?
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Yesterday I had said that if SP 500 had to decline, it will test 3500 in first instance. It reached around 3492. I had also said that if SP 500 was to rise, first test will be at 3660. SP 500 closed at 3669. So both the up and down were in the range I was expecting.
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Lot of speculation around why the market reacted like that and what may happen tonight. It seems that technicals were in play dominantly as a bounce was expected. Also chance that a short squeeze may have happened forcing shorters to buy.
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Everyone is thinking what will happen tonight. There is a bull case and a bear case:

Bear Case

• Fundamentals still very bad including CPI data, so it has to go down
• In last few months there have been a number of instances where we had a big rise and the following day a big drop - so that is on cards
• Seasonality factor - We peak around mid-October, then decline in second half, before doing good rally from end of October/early November. We are in mid-Oct

Bull Case

• Many chart indicators are still pointing towards a further rally in short-term
• Tonight earnings report, many banks, and expectation it may not be bad and hence another good green day

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Chart Perspective - If we fall down, in first instance 3600 level is key, if it does not hold, retest of 3500. If we continue going up, good tests around 3690, 7340 and finally a retest of 3800 - our recent high.
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Personally I had mentioned yesterday that I had bought one-third of my available funds yesterday - reason being many chart indicators pointing for a bounce and also there is a chance that much of the bad news may have already been factored by the market. The action yesterday actually pointed exactly to those two factors. I was in lot of dilemma today and had considered all option - hold, buy more or sell out the one-third I bought. Finally I decided to take another punt and bought one-third more. So I am two-thirds bought, one-third I have cash. There is a lot of risk now because of these volatile activity. Clearly short squeeze had happened and I was fearing the next day big drop which has happened many times in recent period. So then why did I still buy? I have a feeling that this bounce still has legs and may test 3800 level again. Secondly, stocks are becoming resilient and if there is a fall in indices, they might not have a drastic drop - hoping. I still believe that there is 50/50 chance that after this bounce we may fall and go back to test our final bottom around 3400/3420 before a decent big rally. Lot of bears have another 20-30% drop in indices - so lets see.

One other thing that was peculiar was when markets opened 2-3% down, the Volatility Index VIX was actually falling. One would have expected that in the panic it would have shot up towards 40. Some feel that it was a give away that rally yesterday is coming.

So what will happen tonight? US Futures slightly in green. Asian markets in big green - close to 3% many places. Bitcoin after testing 18k yesterday and looking very vulnerable for a big drop, now inching towards 20k. Volatility index VIX on 31.96, still in danger zone and another decline yesterday.

Yesterday I had mentioned that more than 6 days of red is a rarity and probability is on our side - fortunately it played out that way. Although there is an equal chance of a big drop tonight, there is hope among many that we may continue to go up and test the 3800 level on SP 500. Will that happen? Lets hope so. All the best.