ASX200 Christmas rally postponed?
Tony Sycamore December 15, 2020 1:40 PM
10 days out from Christmas is usually around the time that the fund manager community starts to invest surplus cash holdings into the market in anticipation of the Christmas rally.
While there is some incentive from a performance perspective to see their favourite stocks end the year on a high note, fund managers are no different from the rest of us. They are aware of the bullish seasonal trend at this time of the year and attempt to benefit from it.
However, despite the commencement of vaccine rollouts in some countries, an acceleration in new coronavirus cases and a further deterioration in the Australia – China relationship may prompt second thoughts amongst the Australian fund manager community
On Wednesday, Germany will enter a new hard lockdown over Christmas, the same day that London will introduce Tier 3 restrictions. In the US, the NY Governor warned that the state is headed toward a second full lockdown if new infections and hospitalisations continue at their current pace.
Also overshadowing the Christmas cheer for the Australian equity market, confirmation yesterday that China has formally banned imports of all Australian coal.
Furthermore, the 40% rise in the price of iron ore over the past 2 months is reported to have prompted calls from within China for regulatory intervention. The 62% MySteel index fell $6.15 overnight, prompting keen interest to see how iron ore futures trade in today’s session on the Dalian exchange.
Following on from last week’s article on the ASX200 here and based on the events outlined above we are pleased that our suggestion to take some money off the table has worked out well thus far. More so given the bearish divergence on the RSI indicator following the index's second rejection from above the key 6700 level.
The preference remains to add to core longs on a dip back towards interim support 6400/6300 or wait for a sustained break above 6750 to confirm the arrival of the Christmas rally and that a move towards 7000 is underway.
Source Tradingview. The figures stated areas of the 15th of December 2020. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.