Will the back test continue or PPI reverse it?
Yes MLS remained flat to finish on 3.9c. Our volume today average of recent times, still on lower side, over 1.6m shares traded.
ASX Li stocks went down on a weak resource stocks day. Of 54 stocks that I track, average loss was 3%. Some rumors (facts?) around another Li related report to spook the Li sector. As when happens with rise that big stocks make bigger gains, today the fall was also heavy on many of the big stocks - they lost an average around 10%.
Overnight US Li stocks were down as well. Average decline was just around 3.5%, so similar fall like us.
What next -
The US indices declined after two days of big gains. SP 500 dropped close to 1%. ASX was mostly flat the whole day, and ended flat, but resource stocks were not buying that and were generally weak.
Yesterday I had said -One thought is that it may be healthy to back test, especially 3900 once again. this is roughly just over 2% below. A test below and then coming back would be considered good by many chartists. Although US indices were steady the whole day, they lost their bearings in last 1 hour or so. SP 500 did the first test of 3960 and finished slightly below that. Next test is 3900. If we reverse from her, we need to finish above 4000.
Based on trading yesterday and many analysts feeling that a backtest of 3900 on SP 500 may happen, it looks like we are moving towards that test. But what can reverse us from SP 500 level of 3960? PPI data tonight. If it comes out favourable, there is a chance we may reverse and not see 3900. Other possibility is that 3900 could be tested intra-day and we finish above that. Both these would be considered bullish. A fall below 3900 and trying to test 3800 on SP 500 will be bearish, with chances of further drop. I still feel, maybe more hope, that we will will test 4100/4200 in this run.
All the indicators have turned bearish - Yields, Dollar Index and Volatility Index VIX which gained over 5%. Markets today were in semi-panic mode. One bad day even after good gains, and punters were jittery. It just shows that we are still in fear of downtrend - and rightly so, as the whole year has been one which has tested the nerves going to the lower side. Only a solid rise above 4100/4200 may give punters confidence. On sentiment scale, we are still on greed. Many analysts are finding similarity between August high, May high etc and feel we are topping up and may not go much high further - lets see, there are always alternate opinion. Also, if we fall but do not panic, then stocks may hold their level within 5 to 10% - yes, if don't panic. Upside is still big if we cross higher levels. But certainly those risk averse could watch rather than plunge.
So what will happen tonight? US Futures somewhat green. Asian markets mixed but big gains in HK/China based on info from China. Also some Fed talks tonight - some are trying to be hawkish, some getting alarmed that stocks are running away. They may continue to put pressure on markets. Still other Feds have welcomed CPI data and have said positive things. Tonight key PPI data. There is a chance that like CPI it may come in favourable and markets may like it and go big green. Will that happen? Lets hope so. All the best.
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