Afternoon Report / A huge day on the market – ASX down -2.74%

By Market Matters 11 October 18

A huge day on the market – ASX down -2.74%

Market Matters Afternoon Report 11th October 2018


A huge day for the Australian market with the ASX 200 closing down -166pts / 2.74% on the lows of the day at 5883. We opened down -100pts, attempted to rally before midday before another wave of selling hit hard during the afternoon as Asian markets came under more pressure – most down between 3.5% - 5%, China one of the worst in the region, and without stating the obvious, risk was ripped off the table. We went into the session today with some confidence that the 5950 region would be the point where traders stepped in,  that was the case in the morning, but weakness throughout Asia + the US Futures (DOW) got hit another ~300pts during our afternoon trade – and selling perpetuated selling. As I tap away at this note at 5.26pm Sydney time, DOW Futures are down ~200pts and the SPI has traded up +20pts since the close. The aggression in the selling today was strong, more so than we thought it would be this morning and depending how the US trades tonight, we may need to amend our overall view on the market. We were bearish the local index, with an initial target of ~5975, which has clearly been surpassed.

Even though the ASX had dropped ~5% leading into today’s trade we took another 2.7% off it today despite no major changes from an economic / market perspective. This is a momentum sell off that started in the HOT tech stocks in America and has subsequently filtered through the rest of the market. I thought this morning that it was time to step up into panic selling, and despite the market finishing on its lows, I still think that’s the case.

Today was the sort of day that we experienced during the GFC, the only difference being that corporates / balance sheets were stressed at that time, leverage was high and we had a genuine and sustained panic with foundation - there was session after session where stocks were offered hard. To be clear, we don’t think that’s the case this time round. Momentum stocks, that have seen momentum money flow into them have unwound hard. It was the case in the US overnight, and it was the case in our market today… look at the top 10 losers from the ASX 200 today…High value growth was targeted – an area we’ve been cool on for some time now.

ASX 200 biggest losers

After a day like we’ve just had – a huge one on the desk and around the markets generally it can be hard to step back and look at things objectively. A sea of red and all portfolios will be down today – it’s hard to escape it. We stepped in this morning and added Cimic (CIM)  to the Platinum Portfolio with a 3% weighting, we also topped up on Westpac (WBC) / +3%,  Janus Henderson (JHG) /+2%,  and the emerging markets ETF (IEM) /+2%, we sold our BEAR yesterday a day early however that’s an unleveraged bearish position on the ASX which added +2.62% today versus the leveraged BBUS ETF which is a leveraged short on the US market which was up 10.48% today – the only bright spot in the portfolio (other than Fortescue) however having one or two positions in the green on a day like this is certainly not a bad thing.  In the Income Portfolio we sold ANZPD and up weighted Fortescue (FMG) / +2%, and up weighted Perpetual (PPT) /+2%. Super Cheap (SUL) didn’t get down to around $9, however we are keen to add it.

This week alone the ASX is down over 5% and we’ve got a session to go – the total sell off from the 6373 high set on the 30th Aug is now -490pts / -7.68%. Clearly a big drop and we could fall further. The DOW Jones has fallen -1353pts to the close this morning + another 300pts today on the futures taking that decline to -1653pts / -6.06%. We do often see big falls at the start of October and more often than not, that provides a great buying opportunity ahead of the most bullish period into Christmas. Time will tell, however that’s our current view, and we played that view by buying stock when everyone else was selling. If we’re wrong, we’ll put our hand up and take our medicine, however when I’ve stepped up at times like this in the past, ‘buy the panic’ has proven to be the right call. It’s a hard thing to do, and quite frankly pretty unconformable. 

We’ll provide a complete update on our market views in the AM report tomorrow and make some calls from there.  

Overall today, the index closed down -166 points or -2.74%% at 5883.  Dow Futures are trading down -200pts

ASX 200 Chart

ASX 200 Chart


Platinum Portfolio: Bought Cimic (CIM), Westpac (WBC), Janus Henderson (JHG) & Emerging markets ETF (IEM)

Income Portfolio: Bought Fortescue (FMG), Perpetual (PPT) & Sold ANZPD

In the movers below – GOLD stocks were clearly the place to hide…

Have a great night – chat to you in the morning

James / Harry & the Market Matters Team


Market Matters may hold stocks mentioned in this report. Subscribers can view a full list of holdings on the website by clicking here. Positions are updated each Friday, or after the session when positions are traded.


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