Why is the ASX getting smashed?

End of financial year selling. Traders selling weak names to offset against any gains made through the year.

  • Greek issues are in play. The IMF have a deadline ‘before the Asian session’ on Monday and nothing is certain at this stage. Some will feel it’s prudent to take some risk off the table. This view is what the headlines will be saying, but if I sense check this view we are not really seeing any major risk off move in safe havens. Aussie treasuries, gold and US futures are flat for example.
  • Options expiry yesterday. This would explain the monster volume. Traders would have taken delivery of stock and perhaps these holdings were no longer wanted after being exercised. If the pace of the volume slows into the afternoon then this could make sense as  many would have sold on open.

Volume in the cash market and SPI futures is huge (nearly $4.7b in cash).

  • The technical guys wouldn’t care whatever the reason. As you can see the index is making a series of lower highs and lows (i.e. a downtrend) and they would argue that whatever the reason the probability of sharp fall increases if the index is in a downtrend.
  • Some have said the fact Chinese markets fell 3.5% into the close yesterday have seen us playing catch up. This is nonsense as the ASX actually has a negative 20-day correlation with the CSI 300.
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Comments

    • Just the small caveat that their super is there, rote buying, no wonder it mostly goes up 🙄

  1. A benchmark level of support for the ASX all ords is 5000, maybe 5150.
    The uptrend to 5900 starting from this Jan, when Abbott ran the spin on how good the economy was going to go, is largely unwinding with the trend currently down, mostly as equity investors (who are usually an number of cuts above home buyers in financial intelligence) are finally realising the spin was hype and that Abbott himself may not survive another leadership challenge.
    The funds from selling equities can be parked back in the bank in short time, so why take the risk on political maneuverings this break of Parliament. That is the reason behind the selling WW

    • ORG finally taking a beating WW… its been skipping through a mine field for months… kaboom

  2. All of those forecasts of 6000 “if not immediately, then sometime this year” (not from the boys here) are looking like what I thought they were.

  3. Well old school discounting of 10% is a dim memory, which is further clouded by all the perverse incentives built up over some decades to game equity’s for executive remuneration and other equity pump and dump scams.

    Skippy…. do some remember the days when banks were loth to lend on equity’s as an asset without physicals in the basket…

  4. The Traveling Wilbur

    Have a look at the futures indices for the major markets (especially the Asian) markets going back to March. There is a major 1 week long buying spike that is being retraced as we speak. It’s taken months to get to where we are now, this last week or so has seen a major downward accleration in that retracement downtrend.
    So I’m not saying Mr Weston is wrong but anyone expecting things to be better a week from now (after EOFY) is going to be disappointed. Happy to be reminded of this statement in the future… 😉