Trading Day

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The S&P/ASX 200 jumped again on the open, and is now up over 124 points or 3% at 4158 points.

Other Asian markets are experiencing similar big gains, with the Nikkei 225 up 1.15% at 9047 points, and the Hang Seng up further, up 3.3% at 19935 points.

Other risk assets are mixed, with the AUD stabilising against the USD, now at $1.0351 Gold is up slightly, now at $1756 USD an ounce. WTI crude has reversed, up 3% to $81.69 USD per barrel.

Movers and Shakers
It’s generally green across the board, with all sectors up. The banks are rallying strongly, with ANZ up 5%, CBA up 2% on the back of its earnings release, NAB up 6% and WBC up 5%. Macquarie is bucking the trend and is barely up 0.5%

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The resource twins BHP and RIO are also taking part in the strong gains, up 3.5% and 3.9%. Cochlear (COH) and CSL – are up 3.5% and 2.9% respectively.

Today’s Chart
This is a very interesting rebound, after a mammoth volatility day yesterday (and yes, I did succumb to day trading, couldn’t help it with such an immense rally).

Daily chart of ASX200

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As I’ve been saying, 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. The market could rally as high as 4500 points on the back of a “good” earnings season (which is backward looking in results, but forward looking on CEO/management sentiment).

But lets put something into perspective – h/t to Rota Fortunae who said:

There were at least 7 triple digit, multi-day [defiant] rallies in the 6 months between Sep 2008 and March 2009 (cue Mark to market and QE milky wilkies). Around those superb rallies, the ASX dumped 2000 points in 6 months.

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Instead of GFC Episode 2 (Attack of the Sovereign Debt), I contend that the higher probability even will be a similar phase as from October 2000 to late 2003, where equity markets around the world fell up to 50% over a 3 year time period.

In the chart of the S&P500 above, each rally throughout this large bear market averaged 20% and lasted around 12 weeks or 3 months. (note that the market was falling before the 9/11 tragedy, so this cannot be counted as an aberration)

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You will likely hear in the weeks ahead (from Gittins! et al) that everything is fine, as the market rallies, but consider the following projection carefully:

Weekly chart of ASX200 - projected to February 2012

Local earnings season continues – today its Flexigroup (FXL), Commonwealth Bank (CBA), Computershare (CPU) and Stockland (SGP). Remember to bookmark the overall update here.