ASX 200 not breaking highs

One month ago (on June 9th, 2020) I wrote the post below.
The ASX 200 has not traded higher than that June 9th high of 6,198. Today it’s 4% lower, however many market watchers seem to think we have been barrelling into new highs each day.

Although I’d like to note that the stocks I was selling as listed in the original post have all declined between 10% and 20%.

I am not advocating a trading mentality but rather, when you have conviction in your opinion, there are times when you need to protect your capital.

July 10, 20202
by Rob Zdravevski

To be on the record for followers of my posts, today, with the ASX 200 reaching a 62% retracement of the recent peak-to-trough move, I’ve been a seller of the following Australian shares.

BSL $12.88; CWN $10.77; DOW $5.30; EVT $9.85; ILU $9.21; ORG $6.45 and WBC at $19.80.

I also lightened up some positions on Friday June 5th and around May 27th, which is where the vertical dotted line on the attached chart marks the 50% retracement of this rally.

Today, my view is that the index’s advance over the past 8 trading days (since my May 27th “market top” call) constitutes an “overshoot” or lurch amongst low volume and driven (dangerously for many an investor) by momentum rather valuation coupled with fund managers playing “catch-up” due to relative underperformance concerns.

How are you going to explain the next mean reversion to your Mum based on that reasoning?

I’m wondering where are the prevailing tailwinds ?

But on a more actual note, my cross-asset technical readings suggest prices are at extremes and others signal a “topping” process.

Some stock prices are back to their March 6th-9th levels while the better “gift” is that some are back at their Feb 25th prices.

This looks like quite a nice “get out of jail free” card all within 3 months.

June 9, 2020
by Rob Zdravevski

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