- After hitting an all-time closing high on Monday of 7172 the ASX 200 promptly fell 206 points in four days bouncing a bit on Friday – the all-time high is still the pre-pandemic intraday high of 7197.2.
- The budget this week was seen as “market friendly” adding fiscal stimulus bigger than most expectations to the monetary accommodation from the RBA.
- Despite the wobble in technology and momentum stocks this week all the major markets including the ASX 200, S&P 500, and all the European markets remain in solid uptrend is.
- The only market challenging the bottom of the trading range is the NASDAQ. Not a significant break yet but needs watching. This week we sold out some of our technology stocks with the intention to buy them lower down if possible.
- The NASDAQ is down 8.51% in the last week.
- Our technology stocks sold down the hardest with the ALL TECH index down 17% in a couple of weeks led by Afterpay down 36%, still struggling with the short-selling headache.
- Inflation concerns caused by a higher-than-expected US CPI number this week saw bond yields rise and the NASDAQ top out.
- US 10 year bond yields seem to be trending up again.
- The Australian 10 year bond yield popped up but is still essentially in a downtrend.
- The VIX volatility index spiked from 17 to 27 in the US. There was a similar but smaller rise in Australian market volatility.
- Resources are the sector of the week as the iron ore price rips up for a combination of reasons which all seem a little bit too general to justify the sharp rise including pandemic recovery, relentless Chinese demand and Chinese stockpiling. Rises in prices also help.
- The bank sector had results a week ago and all the major stocks went ex dividend this week (Macquarie goes ex dividend on Monday). The results were well received and the sector appears to have held up despite going ex dividend and despite this being the seasonal time of the year for the sector to peak and plateau (after results in dividends).
- The spike in the insurance sector reversed a bit.
- The energy sector continues to underperform despite the rising oil price. The correlation between the energy sector in the oil price is rapidly departing (energy sector down oil price up) and you imagine that it will have to close at some point, hopefully with an energy sector recovery rather than an oil price fall.
- REITs continue to quietly improve although they topped out a bit this week.
- The utility sector remains in downtrend.
- The pandemic beneficiary sectors (Automobiles and Consumer Discretionary retailers) are both still in uptrend but topped out this week a little bit. They have yet to break the uptrend support at the bottom of the trading range.
- The healthcare sector held its ground.
- The gold sector can’t make its mind up after its recent rally. Gold price threatening to break its recent downtrend.
WEEKLY SECTOR CHARTS
Interest rates – Bit of a spike on the back of rejuvenated inflation fears post the biggest jump in US CPI since 2008. The Australian 10-year bond yield is now back up at the top end of the trading range at 1.74%, up from 1.63% this time last week but still in a broader downtrend. US 10-year yield is similarly up to 1.66% from 1.57% a week ago and holding onto a little uptrend.
Iron Ore – smashed through the US$200 barrier in style, flying up to US$237.75, before falling almost 10% overnight as Chinese demand expectations plateau and questions are raised about the sustainability of the elevated price. CRU analyst Erik Hedborg noted “We do not see extreme tightness in the iron ore market, now or in the future. We see little support for the price rising this high above the cost of the marginal producer in the market”.
The Aussie dollar – Sitting around 77c and has fluctuated between 76 and 78c for the majority of the last 6-months. Under a bit of pressure this week on inflation fears.
ASX 200 – Hit an all time closing high of 7172 on Monday and proceeded to drop 206 points across the rest of the week. Led by weakness in the US.
VIX Volatility Index – Spiked around 30% in the US and 23% locally this week. Investors starting to get a bit wary of their risk levels.
S&P 500 – Remains in a solid uptrend despite the wobble.
NASDAQ – Just popped out the bottom of its trading range and looking a little precarious. Not a significant break but certainly worth keeping a close eye on it. Unprofitable tech stocks in the firing line if the inflation theme continues in the short term.
European Markets – Holding onto the solid uptrends despite a tough week.
COVID DEATHS – 7 day rolling average. India still out of control.
COVID CASES – 7 day rolling average. Looks like India might be peaking.
Indian Market – Finding some support over the last couple of weeks.
The Bank Sector – The results were well received and ANZ, NAB and WBC have all gone ex-dividend but the sector is holding up well despite this being the seasonal time of the year for the sector to peak and plateau (after results in dividends). Bond yields ticking up helps. MQG goes ex on Monday.
Resources Sector – Sector of the week as the iron ore price rips up for a combination of reasons which all seem a little bit too general to justify the sharp rise including pandemic recovery, relentless Chinese demand and Chinese stockpiling. Rises in prices also help. Under a bit of pressure this morning with iron ore futures being sold off.
Energy Sector – Continues to underperform despite the rising oil price. The correlation between the energy sector in the oil price is rapidly departing (energy sector down oil price up) and you imagine that it will have to close at some point, hopefully with an energy sector recovery rather than an oil price fall.
Gold Sector – Can’t make its mind up after its recent rally. Gold price threatening to break its recent downtrend.
Insurance Sector – Last weeks pop has almost exactly reversed this week, back into the broader trading range.
ASX All-Tech Sector – Our technology stocks have been sold down the hardest with the ALL TECH index down 17% in a couple of weeks led by Afterpay down 36%, still struggling with the short-selling headache. XRO down 17% in the last two days. The information technology sector is down 27% from the top. There will be a good buying opportunity here at some point.
Healthcare sector – Holding ground but struggling to make serious inroads. AUD under pressure helps the cause. Looks one of the more buyable sectors with the market blowing steam off the top of the ritzy stuff.
Consumer Staples – A bit quiet in the wake of COL and WOW sales numbers last week. More interesting places to get involved at the moment. Holding a mild uptrend.
Consumer Discretionary Sector – Forming a bit of a symmetrical wedge. We’ll want to wait and see which way it breaks from here. Nothing overly exciting about the sector. A2M continues to slide.
Automobiles Industry Sector – Same story as consumer discretionary. Has come off the top but holding its uptrend for the moment.
Hotels, Restaurants & Leisure Sector – Hitting some resistance at pre-pandemic highs. Still well within the trading range of its 12-month uptrend.
Media and Information Sector – Threatening the bottom of the trading range after a bad week.
Utilities Sector – Still in downtrend. No reason to get involved.
Transport Sector – Tracking sideways. Not much to get excited about. High debt levels mean the sector is likely to come under pressure if bond yields move up.
Communication Services – A quiet few weeks but holding on to a solid enough uptrend.
REIT Sector – Continues to quietly improve, though did top out a little this week on rising bond yields.
ASX Small Ordinaries – Sold off as the market turns a little risk averse on inflation fears. Check out Henrys take for everything small caps.
BITCOIN – 22% off the top. Elon Musk’s sour turn is weighing.