Will the momentum continue?
Yes MLS remained flat to finish on 4.3c. Our volume was again a new yearly low, just over 380k shares traded. Need some volume to get away from this area, a good announcement would certainly help.
ASX Li stocks had a decent gain. Of the 54 stocks that I track, average gain was 4%.
Overnight US Li stocks had a great night. Although ETF of LIT gained around 3.3%, rest of Li stocks had a average gain of around 5%, so close to us.
What next -
Yesterday US markets again found their feet. A very strong green night with gains of 2 to 3% on indices, SP 500 gaining 2.65%. ASX followed the trend with gains of around 1.7%, though it had a slow start in the morning - an acceleration in the afternoon - is it in anticipation of another good US night?
On Friday US indices had a big drop. But on the weekend report I had written that there is a fair chance of a bounce to continue based on Yield double top, Dollar Index double top, VIX double top, HYG (High yield bond) in divergence with SP 500, Russell 200 in divergence with SP 500 - there are a few more. So fortunately it played that way and yesterday we got a good gain.
Now we are reaching a crucial stage and tonight will provide the direction. I think two things can play out -
Scenario 1- Overall, I still feel that there is at least 50% chance that we may see a final lower bottom in next few week around initial 3400 but could be on average around 3250 on SP 500. If that were to happen we could drop from these levels (may come back from 3720) or we could continue our bounce and reach around 3800 level before retreating.
Scenario 2- We may have seen the final bottom for October on last Thursday when SP 500 reached 3491. If this were the case, then we could continue to slowly move up but it may not be in a straight line. First real test is 3900, but many feel we could reach 4150 on SP 500 where it will be battled out
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Although both seem to have equal chance, I still feel that Scenario 1 has a good chance and we may see a new bottom in next 2 to 3 weeks - a final bottom or a tradeable bottom - next few days will provide more info. I also feel that if Scenario 1 is to play out (that we have a new bottom), there is a good chance we would continue our current bounce and SP 500 would reach close to 3800 for a duel - where it will be decide what will happen next.
There are no major announcements/economic numbers in the short number. The earnings report may drive the market this week. There is a good chance the earnings report may dictate whether we with Scenario 1 or 2.
Personally I am playing for the bounce towards 3800 to be tested, bought some more today and now 85% invested. Main reason is similar to what I wrote on the weekend report - there are still a number of indicators pointing towards a bounce (double tops and divergences) - but earnings reports could override that. Markets are very volatile, still overall bearish, I have taken some risks and my assumptions could prove to be wrong, so please dyor.
So what will happen tonight? US Futures in good green but it could change before market opens. Asian markets largely green, mostly over 1% everywhere. Cryptos have got stuck in a range for a long time now, Bitcoin at 19.5k - somehow they are reacting now rather than providing direction for stocks. Volatility Index VIX decline by 2% to 31.37 - but still at dangerous/volatile level. Earnings report to provide direction. Markets are very volatile with big gains and big losses, sometimes on consecutive days. We have seen big losses on consecutive days, but its been a while one big green day has been followed by another big green day. There is a fair probability for that tonight. Will that happen? Lets hope so. All the best.
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