The official "ASX is tanking!" panic thread

[waterbottle]

XAO down to 6000
NASDAQ to 10000

Can't edit this post, but I just threw these numbers out based on gut feel more than any "analysis". Only reason I'm bearish is because of this graph and fed rhetoric:





The 2/10 yield curve is a reliable indicator for a recession. GDP numbers in the US have been negative for the past 2 quarters (although last quarter was revised up slightly!). Inflation is turning (based on early data) but may take a while to come down to the 2% range from 8%+. Several fed governors have already publicly stated that they intend to continue hiking until inflation is well and truly defeated, even at the risk of recession - this strategy is also supported by the ECB & BoE, so there is the possibility of a global recession.

The current plan is to continue hiking until 4% and then maintain that rate for a period of time!!!! Current fed fund rate is 2.5%. There are three meetings remaining for the year. Current estimates (courtesy of the CME Fed watch tool) place a 75bps hike at 61% (v. 50bps @ 39%). Markets are estimating a rate of 3.75-4% by 14 Dec 2022 @ 85% chance. Then on top of that you've got QT (Fed previously published a note estimating its effect as the equivalent of a 25-50bps hike ).

So if all goes according to plan, we might peak at 4% - assuming, of course, that the Fed doesn't see the need to go further - then they'll hold for a few meetings before starting to cut. So now I return to the original graph. Market bottoms seem to coincide with whenever the Fed decides to cut, and when we're well into a recession.

So either we're in the middle of a recession right now, and the Fed will cut as early as Q1 2023, heralding a market bottom. Or as per the White House, we haven't even entered one yet and the bottom is further away

Really though, who the f&!@ knows. Nasdaq doesn't get so many -4% down days. This year, the -4% days have been during down legs, or at the very end of one i.e. early-mid June, and they're typically followed by -2% & -3% days later on. So either this is still a buy the dip scenario or we've truly started another leg down...

 

[pavilion103]

So annoyed I exited a short on the ASX futures a couple of days ago.
Knew there was a chance of a fall from this 200ma failure!

Should have stuck to my guns!!
Makes entry harder now!

 

[waterbottle]

So annoyed I exited a short on the ASX futures a couple of days ago.
Knew there was a chance of a fall from this 200ma failure!

Should have stuck to my guns!!
Makes entry harder now!

You're not alone ?

 

[sptrawler]

As long as we have some powder left to buy the dip, all is good.

 

[Gunnerguy]

RBA rate at >3.85% by EOY.
FED rate at 4% (0.75, 0.5, 0.5) by EOY.
Oz inflation above 7% EOY.
US Inflation above 5% EOY .
Oz house prices -10% EOY.
IR rate cuts not before June ‘23.

...... unless the banks chicken out and give up on fighting inflation.

Powell likes Volkers strategy and looks to be committed.

Unfortunately I think things are going to get very bed over the next 6 months. Energy prices issues in Europe, market declines of >15% from here. Global recession.

‘Winter is coming’ and I wouldn’t like to be in Europe over the next 6 months !!!

All will be fine for Christmas 2023.

I’m not going to sell out of the market tho. Currently 10% - 15% cash/liquid which is ~18 months living costs. Using my liquidity to gain income from option trading.

Gunnerguy
(.... Be careful out there, it’s going to get very bumpy, and stay healthy and safe)

 

[pavilion103]

You're not alone ?

There are probably many of us ?

I hope it pushes up slightly to provide an entry but I fear a big gap down!!

 

[pavilion103]

RBA rate at >3.85% by EOY.
FED rate at 4% (0.75, 0.5, 0.5) by EOY.
Oz inflation above 7% EOY.
US Inflation above 5% EOY .
Oz house prices -10% EOY.
IR rate cuts not before June ‘23.

...... unless the banks chicken out and give up on fighting inflation.

Powell likes Volkers strategy and looks to be committed.

Unfortunately I think things are going to get very bed over the next 6 months. Energy prices issues in Europe, market declines of >15% from here. Global recession.

‘Winter is coming’ and I wouldn’t like to be in Europe over the next 6 months !!!

All will be fine for Christmas 2023.

I’m not going to sell out of the market tho. Currently 10% - 15% cash/liquid which is ~18 months living costs. Using my liquidity to gain income from option trading.

Gunnerguy
(.... Be careful out there, it’s going to get very bumpy, and stay healthy and safe)

I’m 100% liquid!!
Plus trading futures.
I’m anticipating a huge crash and opportunity to buy up later!
We’ll see!

 

[Sean K]

A pretty nasty day on Friday in the US, so we'll follow suite. People will be on the sell for sure.

Interesting to see the biggest losers that have brought down the US market. Vast majority are tech who have been running at XXXXX multiple p/e for the past few years. It's analogous to the dot com crash, to some extent. Risk on has come crashing down.

However, normal 'risk off' companies shouldn't really follow to that extent, although it's all intermeshed. Good time to be picking off companies that actually make money and provide dividends with little debt, or will be in the next 5 years. Should be some bargains out there if this keeps going and you've left some powder dry.

 

[greggles]

Hard to know where we're headed now. 1008 points down on the DJIA and 538 points shaved off the NASDAQ. The recent two month rebound between mid-June and mid-August feels a bit like an extended dead cat bounce.

The extreme volatility of early 2020 has returned and there will likely be some wild swings ahead. There will also be some great bargains to be had between now and the end of this year but I have no idea where the bottom will end up being.

 

[bluekelah]

FED says NO PIVOT at Jackson Hole loud and clear this time. No uncertainty there. Powell even said some "PAIN" will be expected and for target inflation to be back at 2% lol, that means rates need to go to 9%? thats nuts!!!

Bitcoin always the first indicator of risk-off sentiment and its come down form 25k to almost back to 20k now. Markets will be down globally next few weeks until something breaks causing a black swan event. Its 2008GFC all over again I reckon, possibly we will see S&P500 below 3500 before the next FED meeting in Sept.

Watch the highlights from powells Jackson hole speech here

 

[wayneL]

My ridiculous end of year XJO prediction suddenly looking achievable... *Might* be in for the trophy instead of the wooden spoon

 

[Smurf1976]

Hard to know where we're headed now.

Just my opinion but I see it as akin to the captain informing the passengers that due to problems we're in for a very hard landing and to be ready to do whatever becomes necessary as circumstances evolve.

Brace yourselves.

More specifically well it seems the Fed is making it abundantly clear, outright saying it, that inflation will be priority over anything else. That being so, it's hard to see the stock market and economy not ending up as collateral damage.

 

[gartley]

My ridiculous end of year XJO prediction suddenly looking achievable... *Might* be in for the trophy instead of the wooden spoon

Not ridiculous at all Wayne. 2021 was always going to be a pivotal time target from years back. Only we didn't know if it was gonna be a high or low. My 2c worth and I apologize if I sound ultra bearish for the long term bulls, but the price action that is gonna unfold in the next few years is gonna shut up a lot of perma bulls in a range of markets that have been beating their chests the last few years. As they say " arrogance precedes distater"

 

[Value Collector]

Not ridiculous at all Wayne. 2021 was always going to be a pivotal time target from years back. Only we didn't know if it was gonna be a high or low. My 2c worth and I apologize if I sound ultra bearish for the long term bulls, but the price action that is gonna unfold in the next few years is gonna shut up a lot of perma bulls in a range of markets that have been beating their chests the last few years. As they say " arrogance precedes distater"

If I had to guess, I would say we will follow the USA down on Monday, but whether its a week or a month away, the market is going to accept that the feds actions are in its best interests, and the stock market will stabilise as people realise that there is no better place to store their capital.

I reckon by the end of the year the market will be above 7500 and inflation would have stabilised as a combination of central bank actions and trade normalisations work their way through.

But, yeah anything can happen in the short run when the speculators panic, so we will most likely be down tomorrow, but for me nothing has changed long-term, I actually like the Fed chairmans speech.

The perma-Bulls have been right for 120 years, I don't really see that changing, they will buy the dips and keep moving forward.

 

[Sean K]

I just wonder how long the Fed will allow the markets to decline before reducing rates and printing more money. They have form.

 

[JohnDe]

I just wonder how long the Fed will allow the markets to decline before reducing rates and printing more money. They have form.

?

The rest of everyone’s investment future started early Saturday morning our time with the speech from Fed head Jerome Powell that sent Wall St plunging.

When the dust had settled and Wall St traders headed shakily to the weekend, the Dow had gone down just over 1000 points, or 3 per cent – it’s biggest daily drop since May.

The tech-heavy Nasdaq Index was down 4 per cent. High octane stocks like Meta (Facebook) and Amazon got whacked. Bitcoin headed back towards $US20k ($29k).

Now, Powell seemed to give the sort of speech that traders did not expect and most certainly did not want to hear.

He seemed to say the Fed would do ‘whatever it takes’- as in, raising interest rates – to tame US inflation.

The smarter among observers would have noted that because the Biden administration had just embarked on a massively inflationary new spending program – laughingly and grotesquely called the “Inflation Reduction Act” – that had to mean US interest rates going even higher than previously anticipated or feared.

The legislation’s title is so obviously laughable, as it splashes ‘free’ money around like Americans have hardly seen, that even the administration and Democrats in Congress have taken to avoiding using the name.

So, was Powell really signalling more ‘slash and burn’ big interest rate rises, starting with the next Fed meeting on September 21?

I remain utterly unconvinced. He was in my judgment engaged in – rather desperately – reversing the famous bit of advice from former US president Teddy – not FDR – Roosevelt.

Teddy’s advice was to “speak softly and carry a big stick”.

Powell is trying to “speak loudly and carry a small stick”.

Powell said getting inflation down “would take some time”, that the Fed would act “forcefully”; and “we must keep at it until the job is done”.

That and more was all “speaking loudly”.

And he might have seemed to have wielded the “big stick” with the Fed’s two 75-point official rate rises at its last two meetings in June and July.

But on Wednesday, ahead of his big speech at the Fed’s annual Jackson Hole get-together in Wyoming, he seemed to deliberately and explicitly rule out any more 75-pointers.

Powell said Wednesday that future rate hikes larger than 50 basis points were “not something the Fed is actively considering”.

At best there’s a bit of mixed messaging between Wednesday and Friday. Wall St went up after Wednesday – continuing its strong recovery from June to be up nearly 15 per cent over the two months.

This had dragged our market up 11 per cent from its June low-point. Ahead of, of course, what happens on Monday.

Now, if only the messaging was clear-cut and could be believed, there would be a clear – and yes, unpleasant, but nevertheless clear – investment horizon. Most directly for shares, but also property.

But exactly as we’ve seen over the last few months, not only is the messaging – and the actual delivery of rate rises – murky; we also have to factor in the ‘dancing’ that takes place between Wall St and the Fed.

Broadly, the Fed signals it is going to get tough, it is going to hike rates, maybe even do “whatever it takes”.

Wall St throws a tantrum, trying to convince the Fed that “the cure – higher rates – is worse than the disease – inflation”.

And knowing, knowing, the Fed will respond.

It always has in the past – most spectacularly after the GFC, when it first slashed rates to zero and started its multi-trillion-dollar money printing that sent share and property prices soaring.

And not just in America. The reason we’ve got million-dollar properties scattered through our major capital cities is a direct consequence of what the Fed has been doing since 2008.

So what the Fed does – and just as importantly, does not – do in coming months, indeed years, plays directly into not just where our share market goes but our property market as well.

Even though that impact gets “mediated’’ through what our Reserve Bank does with its own official rate and the flow-through to bank home loan rates.

The impossibility of sensible prediction is a cocktail of two things.

The first is that whole Fed-Wall St interplay.

The second is that the whole world has changed around it.

The entire European continent has got existential problems with energy built on inflation much higher than in the US or indeed in Australia.

The Chinese growth miracle that has underwritten the global economies and even more dramatically our own since 2000 is teetering if not collapsing. With its zero-Covid policy coming on top.

And then we’ve got our own issues – inflation, rising rates, the Covid hangover, in spades, etc etc – and a government embarked on rapid energy suicide.

It’s at best a ‘volatile mix’.

TERRY MCCRANN BUSINESS COMMENTATOR

 

[waterbottle]

I looked at some historical data over the weekend. ASX tends to be less volatile than the NASDAQ, and it doesn't replicate the same large movements that US markets experience. Having said that, big moves exist, they're uncommon, and aren't always the beginning of a new trend....

 

[Smurf1976]

I just wonder how long the Fed will allow the markets to decline before reducing rates and printing more money. They have form.

Just my opinion but they'll keep raising rates until something breaks.

The questions are what breaks and when but they'll just keep cranking up the pressure until it happens.

Once it does, as with anything that has collapsed or burst, it all comes down real quick.

 

[Sean K]

Down 2%, so far, isn't too bad. Just wonder if there'll be follow through in the EU and US on their Mondays...

Would be nice if it holds above this general support line, but looks pretty vulnerable.

 

[Telamelo]

Down 2%, so far, isn't too bad. Just wonder if there'll be follow through in the EU and US on their Mondays...

Would be nice if it holds above this general support line, but looks pretty vulnerable.

View attachment 146061

Worth keeping an eye on pre-market US future's currently down -331 points (as to continuation of selling momentum from last Friday night?)