Stock Market Update for the ASX and US Markets
Published August 9th, 2021
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ASX Market Update
I thought I’d just give you a bit of a rundown of my thoughts on the markets, both in Australia and the US. We’re just going to be looking at some simple support, resistance trend lines.
So, first up, the Australian All Ordinaries, this excludes dividends, so this is just the cash component. We’re at all-time highs here at the moment. Our friends overseas, you probably don’t know, Australia, that did so well to limit coronavirus, is now all back at lockdown again. They’re very strict on the lockdowns. Half the country, if not three-quarters of the country, is now in lockdown again, but really not impacting the market here at all.
We’re at all-time highs, you can see just probing up here. The important levels to look at, basically 7480 is minor support. If we break through there, then we pull back to this 6850 to 7,200 zone, and I would only really get concerned if we broke down through that 6850 area.
We do have a couple of diagonal trendlines. For the record, I’m not a big fan of these diagonal trendlines in any way, shape, or form. I feel that most participants that are using technical analysis tend to be looking at horizontal lines instead, specifically with reference to all-time highs and major areas of support and resistance.
So, the one thing I will say, and this goes for the US as well, what we are seeing here, this bottom pane down here, is the average true range. And you can see we’re very, very low down here. Basically that means very low volatility. The rule of thumb is volatility rotates from low volatility to high volatility, and you can see we’re very, very low there at the moment. That probably is a little bit of cause for concern, because one would assume that it’s only a matter of time before that rotates higher. Generally speaking, when volatility rotates higher, it means the market will go lower. But at this stage, absolutely nothing on the agenda suggesting that there’s going to be a trigger. That said, we never know ahead of time what that trigger will be. It could be anything.
We’re in the middle of earnings in the US and here in Australia. They all seem to be going swimmingly. A few ups, a few downs, but more importantly, there’s strong earnings in these markets at the moment, and that’s what’s holding them up. So, that’s the All Ordinaries.
With regard to the S&P 500, or the US markets, same kind of thing. We’re just grinding higher. It’s a sustainable trend. We’ve got support here at 4230 to 4260, very minor support. Break of that probably slipped down towards that 3975 to 4050. If we break down through there, the next support level’s around 3600, 3650. Again, I wouldn’t be overly concerned unless we broke down through that 3,600 area.
All in all, a move down that way would just be a standard retracement in a bullish market. We retain a very bullish outlook on the market. S&P, eventually, we see up towards 5,500. Probably not gonna get there sooner, but towards the end of the year, maybe early next year, but all in all very bullish.
Same kind of thing here with regard to the volatility. You can see the 20 day ATR is very, very low and trending down. So, it oscillates upwards and downwards at the moment, very, very low. One would assume that, again, that’s going to start pushing higher, which in turn would suggest the market is potentially going to have a bit of a selloff. I can’t predict when that will occur.
This particular chart does have our hedge tool on here. This is a proprietary tool that gives us an indication of upcoming volatility. It’s not a hundred percent perfect, but it does work quite well. If we zoom out to the weekly, you can see that back here, before the selloff, we got the big signals and some of the smaller selloffs as well, so. It’s just a hedge tool. It’s exactly that, just a tool, nothing more, nothing less, and we use it in conjunction with our other portfolio tools.
Nick Radge Portfolio Performance Year to Date
Speaking of portfolios, we’ll just take a look at my own personal performance year-to-date. I know a lot of followers tend to like to see what I’m up to, what’s going on, what I’m thinking, that kind of stuff. So, in the Australian market, the three portfolios that I trade there, year-to-date, the Growth Portfolio just up three and a half percent now. You can see last year that portfolio had a down year. I’ve been trading this Growth Portfolio, which is a variant of the Bollinger Band Breakout strategy that I discussed in Unholy Grails.
I built the Growth Portfolio back in the late 90s, and we’ve only really made two minor changes to it over the years, once in 2008, another change in 2015. We’ve been on the research with it recently as well, mainly because the portfolio performance in the last year or two has been a little bit slow, and I’ve discussed reasons why that is the case. I’ve now started trading an adjusted version of this, only very recently. We’re going to do that with live trading to the end of the year. That’s going to be showing, hopefully, perk up in performance, so I’m excited about that. It will take a little time to flow through, but if I’m happy with it, by the end of the year, we’ll introduce that to clients. It still has very good long-term returns, just having a bit of a bump at the moment.
Weekend Trend Trader up a little over 15% year-to-date.
ASX Momentum up just under 16%, strong performances for both of those portfolios last year. And again, I believe that over the longer term, they are the places to be.
Weekend Trend Trader trades smaller cap stocks, whereas the ASX Momentum trades large caps only, just the ASX 100. So, people come to me, they’re new to the markets, and they wanna know, you know, what’s the best way to get involved? Well, if you’re new to the markets, you don’t know much about it, and you want a systematic way to beat the markets over the longer term, you really can’t look past the Australian or the ASX Momentum strategy. Very simple to operate. Very strong returns over the longer term, annualized return of 22%. As you can see, last year, we returned 27 and a half percent for the breadth period that we had, that introduced for the full year last year, returned 59%.
Onto the US markets, our Trade Long Term Premium Portfolio year-to-date up 28.8%. Now, this portfolio really struggled at the start of the year, went into a bit of a stiff drawdown after last year’s bumper 97% return. I did say, back in March, that when a portfolio goes into drawdown, especially strong portfolios like this, that’s the best time to get involved. So, at the moment we’re up 28.8%, one or two stocks solely responsible for that, but that’s the way trend following tends to work.
We look for the outliers. Last year, the outlier was Tesla. And so far this year, the outlier is Moderna. Now, what Moderna does in the near-term, I have no idea. Earnings were out last night, a bit of volatility in the stock, but more or less it checked out. It closed unchanged, so we’ll see what happens there. It might go down, it might go up. I don’t know. What I do know is the portfolio will get me out, if it starts to go down.
US Momentum, it’s a broader diversified strategy, trades the Russell 1000. In a little bit of a drawdown at the moment, about 8% drawdown, up 20% year-to-date, though, we were up about 27% there at one stage.
US High-Frequency having a bit of a struggle so far this year, only up 5%, and that’s mainly because there’s not a great deal of volatility around. Shorter-term strategies tend to perform a lot better in higher volatility markets, not really going on at the moment in 2021 for the High Frequency, so just that 5%. Swings & roundabouts was up 59% last year.
My personal day trade strategy – not the turnkey one. It’s just my personal one up 37 and a half percent so far this year, trades the Russell 1000 and Russell 2000 stocks. And for 2020, it was up 51%.
So all in all, look, we’re in the green, not smashing any records or anything like that, but that’s to be expected after such a great year last year, swings and roundabouts, we’ll take the good with the bad. The important thing here is we just stick with it and look at it for the longer term.
So, in summary, my view of the markets, which really isn’t important, because I can’t predict the future, is we retain a bullish outlook, especially tech stocks. I think tech stocks are gonna continue to be a bullish superpower, at least for the next 10 years. And that’s why we’ve got that Trade Long Term Premium Portfolio, which focuses solely on those tech stocks. So, looking bullish. S&P 500 up towards that 5,500 area over the next six to nine months. We’ll just roll with it and see where it takes us next year.
So, thanks for your interest. If you’ve got any questions, drop me an email.