Our local market today put on the best gains (indices wise of course) since May , of about 110 points in a least expected day for such gains. So what prompted this big move? The good news around the Phase One deal have been overcooked. Our budget surplus short by $22b over 3 years reflecting a subdued local economy- bad news means good news for rates? But banks are moving higher too, lower rates are bad for banks. Or China industrial output better than expected - but we have had similar type of Chinese data before which never accounted for a corresponding rise on the ASX.
Or perhaps the fundies thought ASX can't stay laggard forever and must rise to better align with the fortunes experienced in global indices? Go figure! Volatility and bipolarity remains , we won't know how much further Wall St is get to in the short term nor have clarity if this sudden spike in domestic exuberance is not a one shot pony.
If you have been reading this thread awhile now, you would remember that I constantly spoke about the unreliability of looking at the indices as a gauge of market strength. Now, courtesy of John Hussman, I have a chart which shows the divergence of the broad US market from the capitalization-weighted indices (S&P500). It can be observed in very simple “participation” measures like the percentage of stocks that remain above their own respective 200-day moving averages. The chart below (h/t barchart.com) shows how participation has lagged during the recent blowoff advance. In other words, a selected group of stocks may have contributed significantly to the rise in the indices , it wasn't a broad based market participation. And we have the same story playing out locally here, first with the WAAAX stocks and now rotating to the blue chips mom&pop stocks (which caused the ASX200 to rise sharply).
The followers of this market gain could well follow the next exit - be careful not to get blindsided. Market commentators like to talk of this as "noise", in other words, just stay invested and forget the daily gyration. But the "noise" is getting louder and frequent each day with inconsistent patterns , which cannot be easily explained nor understood. Buying or selling in the midst of such "noise" can be a disorientating experience in the absence of a strong fundamental rationale for the rise (or loss).
