Good steady march on indices - will it continue?Yes SYA gained...

Good steady march on indices - will it continue?

Yes SYA gained 2.5c to finish on 26c. Our volume today was very good, reminiscent of strong good days we have, just over 180m shares trades. Our trading today was similar to first week in October, a similar volume and a rise from 22.5 to 25.5. Next day we rose further, so looking good. So after 9 days in hibernation at around 22c, it has come to life. I had a feel we will be around 28.5c shortly as have mentioned couple of times recently. If markets behave tonight, that is clearly on the horizon - the first step.

ASX Li stocks had a mixed day. some did very well, others flat and some could not find their feet. Overall, of the 54 stocks I track, on average there was no goin or loss - so remained flat.

Overnight US Li stocks did not have a good day. Average loss was over 2%. I was apprehensive that even after indices had gained, US Li punters were not buying it. But ASX Li did fairly well I thought.


What next -

Yesterday US markets had another good day. Though there was plenty of drama before and after market opened, swinging between green and red, but eventually finishing fairly strongly. ASX had a small increase of around 0.3%.

So where are we with respect to SP 500 which provides a very good indicator of how US markets are performing, ASX mostly mirrors it, most times direction is same, intensity can be different. Yesterday I had said that first target is 3800 on SP 500. We did reach there, 3810 intraday beating early October high of 3806 - so a good sign, new monthly high. We finished at 3797.

From charts perspective, SP 500 numbers -

A bull case from here:

• Firstly - Stay away from 3780.
• Secondly - possibly go above 3800
• Thirdly - Make a next attempt on 3900.
• Fourthly - Target 4150

A bear case from here:

• Stay below 3780
• Take out 3710
• Take out 3660
• Then 3600, 3500, 3491

.
Although anything can happen, but for the immediate the charts and technicals are looking good for a continuation of rally. Even some strong bears, like analyst from Morgan Stanley, is also agreeing that in short-term a target of 4150 is possible. Sentiment just last week on the oscillator was Extreme Fear. Just in few days, it slowly moved to Fear, now to Neutral. Another couple of days, we might enter the Greed phase - its considered very positive for stocks. Dollar index decreased slightly.

So what are things still not looking good? Besides overall inflation, yesterday the 10 year yield still increased by around half percent. the Volatility Index VIX did not buy the rally complete and rose slightly. Its still below 30, but needs to get below 28. Till now many analysts have found a strong correlation between how SP 500 went in 2008 crash and now - so many feel there is strong possibility still of capitulation at some stage. China/Hong Kong market really doing bad and some are concerned it could others at some stage. SP 500 retreated from 3800 mark last time, it can do that again if it retreats from here.

Personally I am well in the markets trying to play out this rally. Unless some key down indicators are broken or there is very bad news (like Fed speak etc), will stay put for now - as I had outlined the risk-reward in the weekly report.

So what will happen tonight? US Futures flat at this stage. Asian markets mixed, China/HK down, others in green. Cryptos are not moving. Volatility Index VIX just under 30. Lot of earnings report, but some some key ones from tech giants after close of market. Yesterday PMI figures came in week, Fed may like it. Today some housing data. Everything is pointing that the rise may continue and should test out 3900 on SP 500. My only concern? After 2 green days, there is a tendency to give away a little or take a step back - its still healthy as long as it is small and not capitulation. But we have already given a lot of consecutive red days. Probability says that a reverse can also take place. will that happen? Lets hope so. all the best