This is an outsized streak

For ASX 200 index watchers, I produced the image below at the mid-point of todays trading session.

The index has since risen a further 0.3% (to 6,442) but overall, the ‘fat part’ of the trade has been seen.

You are now looking at an index which has risen 8.7% over 8 consecutive days. A time streak not seen since mid February 2018 and October 2017.

P.S. most rising streaks lose steam on their fifth day.

In those previous 8-9 day rising streaks, the ASX rose 4.5% & 4.8% respectively.

Coincidentally, the ASX 200 is now 2 standard deviations above its daily mean.

And as the commentary in the chart mentions, there are ‘gaps’ to fill.

Market timing does matter and it’s important to observe when the pendulum is at the height of its arc.

Psychologically, I ask 3 questions to those chasing this market higher today.

a) how much more gain are you trying to squeeze out following such an abnormal run?

b) have you quantified how much risk you are taking for this ‘extra’ gain?

c) what is the probability of this daily streak continuing tomorrow?

November 11, 2020
by Rob Zdravevski
rob@karriasset.com.au