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ASX: Aussie stocks continue the climb

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Fuseworks Media
Fuseworks Media

By Betty Lam (Partner, Vital Addition)

The winning streak continues with Aussie stocks marching upwards for the eighth consecutive trading session. Undeterred by a flat finish on the US session over the weekend, Aussie investors seem to be scooped up by the buying bonanza that was initiated last week. The local bourse has firmed up a draw dropping 230 point since the start of last week, reaching all-time highs for 2016.

The steep climb has made traders nervous as they wrestle between trend following and shorting. The steep ascent we’ve seen both on the US and local markets are signs of potential short covering. Traders are cautious that this substantial climb may also see substantial profit taking. The classic analogy of up the up the escalators and down the lift comes to mind. The VIX or fear indicator closed around 12.5 over the weekend. An incredibly quick retrieval from the 29 we witnessed during Brexit and is the lowest reading since August 2015. A read below 13 is traditionally low for the Fear-index who’s 200 day average is marked at 15.7, traders believe this could be pointing to a potential calm before the storm.

In afternoon trading, local stocks continued to lock in gains, adding 26 points to the ASX200. Monday’s session saw consumer discretionary stocks take the lead. JB Hi-Fi and Domino’s Pizza both chalked up over 2% advances across the day. JB Hi-Fi assumed acquisition mode as it made an $850 Million bid for competitor The Good Guys. Domino’s Pizza showed they reigned supreme in the retail fast-food stakes by gnawing the $70-resistance again. Major miners, BHP and Rio saw a second session of sell off as they buffered softer base-metal prices.

Looking ahead, Tuesday’s Monetary Policy minutes release from the RBA will see activity in the local currency. Sitting just below the USD0.76 handle, we may see this tested on Tuesday. The big banks which received tepid upward support on Monday’s session may come under the radar come Tuesday’s minute’s release. All eyes will be on Wall Street’s performance tonight and whether this recent rally will continue with the same fervour.

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