It feels like Christmas has come early to the markets. Volume has dried up, and there is very little movement.
The only thing that looks even a little bit interesting is gold. As long as it can hold above US$1,735 by the end of this month, it will be the first solid buy signal in gold since April 2021.
I picked up another large-cap gold stock during the week just in case we are on the verge of a decent bounce in the gold price.
I am less bullish about the prospects for equities in general, though. The ASX 200 has done an amazing job of recovering from the bout of selling in the middle of the year.
But next year is looking pretty cloudy, so I’d be wary of getting caught up in the current bullishness in a big way.
I will even stick my neck out far enough for it to get chopped off and say that 7,320–7,470 is the danger zone for the S&P/ASX 200 [ASX:XJO].
If I see a weekly sell pivot from that zone, I will be having a long think about taking a bunch of profits and lowering overall exposure.
I explain why in the ‘Closing Bell’ video above — but note that I discuss the S&P/ASX 200 futures in the video, which has slightly different levels than those quoted above.
I read a report during the week discussing hedge fund positioning, and it was interesting to note the lack of exposure across the board. The average hedge fund has 71% of assets invested in their top 10 picks (usually 50–60%), which means they have whittled down their portfolios to a core holding.
They also have a high level of shorts in the S&P 500. That would be another reason why markets are slowly gravitating higher, stopping people out of short positions.
But volume is falling off a cliff in the futures the higher it rallies. There isn’t much momentum behind the move.
If you nearly had a heart attack in June when the markets got pounded, you should perhaps see the current rally as a ‘Get Out of Jail Free’ card.
Until next week,
 |
Murray Dawes,
Editor, Money Weekend
