XJO had one of the biggest one day falls for 2018, 1.58%.Why was...

XJO had one of the biggest one day falls for 2018, 1.58%

.Why was it so dramatic, when the Nikkei , the Hang Seng, and the Shanghai composite, were all up? European markets were generally off around 0.6%. Even oil had bounced up quite well after dipping below $50 for a very short time.

The most logical explanation that I can draw, was that corporate investors withdrew large positions in anticipation of a rout in US markets to follow on Friday night, Aussie time. That didn't happen and the Dow 30, the S&P 500 and Nasdaq 100 all made substantial gains towards the end of the trading session. The increase on Friday was just over 0.8% for all three main indices.

My belief now is that those that quit ASX equities due to fear, will discover on Monday that they got it wrong. A strong up day is very likely on the ASX if not derailed by any sort of punch up at the G20 on Saturday evening.

If you went long on the index right on 4 pm Friday, you could be looking for a substantial gain in the short term.

The likelihood that US indices are in recovery mode seems to be increasing with each day, and there is the positive influence of the double seasonality there acting as a tailwind. 

1) Time of Year- November thru to May are historically the strongest.

2) In a mid-term election year (2018), the US market is always higher 6 months later, compared to the days prior to the election. 

Santa Rally is coming, the sleigh getting a major service so that it can definitely visit the Northern Hemisphere. I wouldn't count on it that Rudolph and his trusty reindeer mates will find their way south of the equator. But we sincerely hope that they can find it in their hearts to extend the journey.