Business & Investment

Christmas rally is coming to ASX

Last week, I came up with the idea that volatility is equal to opportunity.

To put this sentiment into action, we sent three purchase alerts to our subscribers.

Overnight, the Dow Jones rose 2% and oil rose 4%.

This should also boost the Australian market today.

Now you can see if the stock can resume the upward march.

Yesterday was ugly behavior across the small cap sector.

They have been under considerable pressure lately.

My old colleague wrote about “small caps”. I remember when he talked about a “silent” crash in this area.

It’s silent because you don’t tend to hear about these recessions in the mainstream press.

Also, indexes like the ASX 200 do not capture it. I don’t think even small cap indexes capture it.

But you can see it playing in front of you.

Is this a leading indicator of the stock market in general?

Maybe.

2022 now looks clearly dark.

We are aware of the big themes of valuation and sentiment: rising interest rates and COVID.

And the market may still overcome these concerns.

Are there other surprises that none of us are thinking about?

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Maybe again.

Here’s how to deal with this: I’m focusing on individual stocks and what can move them.

Choosing the driving force behind the market is too difficult and fluctuating, and it’s easy to make mistakes in my books.

So I called my service Catalyst Trader.. I find something unique to the individual stock that can move it. The idea is not to rely on the rising market.

However, positive market sentiment has helped a lot and is no longer there.

It also depends a lot on the time frame.

I was sending an email to a colleague in the United States this morning. Part of his mission is to find income opportunities for US investors.

I told him that Australia was zero at a much lower rate than the United States. There are still big yields offered here.

I wouldn’t be surprised to see foreign bids on these assets.

Look at the Australian dollar now. It has dropped to 70 US cents.

This gives American investors great purchasing power here. And they may get a kick from the Australian dollar in the next few years.

After all, Australia is currently running a trade and current account surplus.

Commodity outlook is good, with decarbonization and renewable energy promotion going on.

Commodities (and commodity currencies) can also be considered inflation hedges.

Of course, the heart is what happens in China.

Just news …

The central bank of China announced on Monday that it would reduce the amount of cash the banks had to prepare. This is the second move this year, releasing 1.2 trillion yuan ($ 188 billion) in long-term liquidity to help slow economic growth.

One of the things I recently pointed out to you was the “relative strength” of ASX’s large iron ore miners.

With this answer from the central bank of China, it is dangerous to speculate that the market is pricing.

Watch how they move from here.

Iron ore of $ 100 per ton still offers very good cash flow and margins. If you move up a little, you will get more cream.

And now, the US dollar’s earnings are good and the Australian dollar is very weak.

Take a careful look at the market from here. If you want to host a Santa Rally, you need to start now.

Good luck,

Calm Newman signature

Calm Newman,
Editor, Daily Reckoning Australia

PS: Remember the cause that is close to my heart. My nephew Ned is in a terrifying condition called cystic fibrosis.

Every Christmas, CF Charity conducts a fundraiser called’Put on socks on CF‘. You grab a pair to help collect money for them. Please liven up the Christmas mood!

You can see All the socks here..

Christmas rally is coming to ASX

https://www.dailyreckoning.com.au/christmas-rally-coming-to-the-asx/2021/12/07/ Christmas rally is coming to ASX

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