Trading Day

The S&P/ASX 200 slumped again on the open, after absorbing one of Wall Streets biggest one day falls in history. The market is down over 168 points or 4.4% and stands at 3817 points.

Other Asian markets are experiencing similar sharp losses, with the Nikkei 225 down 4.5% at 8692 points, and the Hang Seng falling further, down 6.5% at 19010 points.

Other risk assets are having similar palpitations, with the AUD just below parity against the USD, 99.67 cents!! Gold has rallied strongly and continues to hit all time record highs, now at $1742 USD an ounce. WTI crude continues to fall, now down almost 3% to $84.40 USD per barrel.

Movers and Shakers
It’s red across the board, with all sectors falling, although energy and IT sectors hit the most. The banks are down between 3 and almost 4% with Macquarie down 4.5%

The resource twins BHP and RIO are again the main suspects in pushing the index into deep negative territory, down 3.5% and 5.6%. Cochlear (COH) and CSL – are down 3.7% and 4.1% respectively, although management must be welcoming the below parity weakness in the AUD.

Today’s Chart
Well I got the “rebound surprise” wrong didn’t I?

Daily chart of ASX200

The Australian market will be going through some high volatility in the month ahead because of the full year earnings season (Australian companies only report twice a year), which will add to the overall market bipolar behaviour.

Local earnings season continues – today its Reckon(RKN), Cochlear (COH), Coca Cola Amatil (CCL) reporting and National Australian Bank (NAB) updating its last quarter. Remember to bookmark the overall update here.

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  1. ceteris paribus

    So some commentators in the US are calling this sell-off part of the Great Correction, of which the Nov 2007-March 2009 fall was only the first tremor.

    This mega debt and deleveraging thesis talks about a possible end point for the Dow around 5000, paralelling the Japan asset deflation “event” from 1989.

    I would be interested to hear your (necessarily speculative) crystal balling on how low this dip might go.

      • Or maybe even lower. The general public is still selling gold. Look at how many gold buying booths are about in shopping centres nowadays. Every time gold rallies, like now, people flock to sell them their gold baubles.

    • The usual caveat is “I don’t know”.

      I think the US is more likely to go the way of Japan, but they have already have been in a sideways bear market for over 10 years.

      It would not surprise me in the least to see the March 2009 low again.

      But I also will not be surprised to see a 50% rally from here, although 10-20% is more likely (say 4500 on the ASX200).

      This is a time to be your own central bank – do your own money printing. Because I think the real printing is just about to start…..

    • Crystal ball for me says we bottom in coming days, and rally or chop sideways in a volatile manner to early to September.
      Then in September the market makes a nice top with perfect chart patterns and trend lines for Avid to short, and then heads off lower again, below whatever the low happens to be from August.
      September and October are the usual panic months.
      At some point we will test the 2009 lows around 3200.
      Okay it wasn’t really a crystal ball gaze, more a daydream…

  2. I am wondering when the index managers such as Vanguard start the reweighting process by purchasing the market due to the large correction. I still reckon we will see the market close about 3900 today, though I reckon a longer term correction to about 3400 is pretty probable.

  3. I love these types of markets. Ashame they only happen once every so often.

    Have commenced some niblling on a few key commodity stocks. Again August has shown to be a a great time to start purchasing. I thought the June/July commodity sales were modest (and all we would get), but this was a whooper!!! – and just shows how important seasonal variations are and ensuring the timings.

    I had been waiting for oil to breach its 200mda with some cream for a while. Was excited yesterday and thought that was good – but today has given some more love.

    September/October do look being volatile.

    But the pessism is immense – Minute by minute updates in the papers!

  4. You can’t be held to account on a day like this. I wouldn’t try to second guess the big players. AUD is back above parity, and many of the ASX has come back a bit like you suspected, but what about later or tomorrow. If the rate reduction by some banks and the commodity sell off is anything to go by the AUD will go lower. The USD might weaken also so AUD back up.

    Ben might speak tonight after the FOMC, or later in the week, so I’ll bet the market are hanging out for that.

  5. Oh and here comes the 2 pm rally – market up to 3900 points. If it can break above 3930 or so, there could be a sustained rally into the close. (The Lorax asked me earlier what I thought would happen)

  6. The market is back into positive territory as of 2.35pm. You got to love the aussie punter. We different here!

    • John Theodorou

      There was bound to be a counter rally at some point, but the damage has already been done. Besides, strong rallies are just symptomatic of bear markets, especially before capitulation.

      My tip: ASX to below 2900 before XMAS!

      • You will probably find that traders are covering short positions.

        Tonight the Fed is due to speak at 2.15pm US time after its FOMC meeting. There are probably few traders that would be willing to hold too many positions overnight given that tomorrow we could wake up to QE3 on roids and the ensuing rally.