Tickets are selling fast as the ASX roller-coaster is about to embark on another wild ride

March 20, 2020 - 2 weeks ago
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The S&P/ASX 200 index is likely to continue its unprecedented roller-coaster ride amid the coronavirus turmoil after another wild roller coaster ride on Wall Street overnight, the ASX is expected to once again start on shaky ground.

In a topsy-turvy session on Thursday, U.S. stocks managed to close higher, erasing steep losses from earlier in the day, as substantial gains in big-tech shares led to a sharp turnaround.

The Dow Jones Industrial Average rose +188.27 points, or nearly +1% to 20,087.19, while the S&P 500 was up +11.31 points, or +0.5% at 2,409.41 with the tech-heavy Nasdaq Composite outperformed with a +160.73 points, or +2.3% advance to 7,150.58.

Shares of Netflix and Facebook rose +5.25% and +4.20%, respectively, while Amazon gained 2.78%.

Earlier in the session, the Dow was down -721 points, or more than -3%. The S&P 500 briefly fell more than -3% as well.

Meanwhile, the SPI 200 futures closed at 4,944 and points to a rise of +119 points, or +2.5%, at the opening bell.

However, due to the uncertainties, it is anticipated the benchmark S&P/ASX 200 Index will likely be a rocky start.

It was also a wide roller-coaster ride for the Australian Dollar after rebounding from a near-18-year low of US$0.5507 on Thursday, the local currency surged to an intraday high of US$0.5963 before plummeting 2 cents and is currently buying US$0.5711 (as of writing).

From the technical assessment, the S&P/ASX 200 Index 3-day Relative Strength Index (RSI) lookback is supporting ‘bullish divergence’ as the indicator slowly climbs out of the extreme oversold territory.

Therefore, we could soon see a short-term correction, but to what degree, remains questionable, considering the current market (and global) environment.

In technical analysis, divergence can be a significant warning signal that a bullish or bearish trend is coming near to an end.

Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement.

These “disagreements” are strong signals and somewhat useful for the trader/investor.

Bullish divergence occurs when the price of an asset makes a new low while the indicator starts to climb. Bearish divergence happens when the price of the asset reaches a new high, but the indicator fails to do the same and instead closes lower than the previous high.

Daily outlook on the benchmark S&P/ASX 200

The Australian share market rollercoaster ride took another hard turn on Thursday following an unscheduled rate cut from the Reserve Bank of Australia (RBA).

The emergency meeting held this afternoon witnessed the Reserve Bank of Australia (RBA) making history, after cutting its cash rate for the second time in a month.

As widely expected, the RBA cut its cash rate by a further 25 basis points after already doing so at its regular meeting at the beginning of March.

Thursday’s cut takes the cash rate to 0.25% and potentially, for now, is the RBA’s last cut for the meantime having recently flagged that it would not lower the cash rate below this threshold.

Along with the cash rate lowered, the Reserve Bank is providing a three-year funding facility of up to $90 billion at 0.25% interest to banks provided they lend cash to small and medium-sized businesses.

Elsewhere, the Commonwealth Bank was the first of the “Fab Four” (banks) to react, revealing it would not cut standard variable mortgage rates in response to the Reserve Bank’s move.

Despite the RBA’s emergency rate cut, the benchmark S&P/ASX 200 Index finished down -170.3 points, or -3.44%, to 4,782.9, leaving the benchmark -34% below its 7,197, February 20 high, after posting an intraday low at 4,741, last seen back in 2016.

Finance stocks were among the worst performers, with the ANZ bank shares falling -10.76% to $15.10, while Westpac plummeted -9.76% to $14.80, with the National Australia Bank dropping -9.46% to $14.87, and the Commonwealth Bank fell -7.11% to close at $61.01.

Elsewhere, Flight Centre’s shares nose-dived another -33% to $9.91 before the company entered a trading halt pending a further announcement. Webjet also suspended trade in its shares ahead of an update from the company.

Over the past month, shares in Flight Centre and Webjet have lost a whopping -74.3% and -70.5% of their value respectively.

With aircraft fleets grounded across the world and demand for other transport services expected to fall, the collapse in oil prices escalated overnight.

The price of U.S. West Texas Intermediate dropped near its lowest level since 2002 of $20.45 a barrel which added additional pressure on local oil and gas producers.

Among the major energy companies, Worley dropped -7.9% to $5.11, while Santos lost -12.23% to close at $2.80, and Oil Search ended the day down -17.74% to $2.04.

Mirvac’s shares dropped -18.03% to close at $1.71, while shares in Stockland fell sharply to $2.09, plummeting -25.62%.

Meanwhile, our big supermarkets share climb as continuing demand from panic-buying lifts Woolworths by +0.76% to $39.90, while Coles rose +1.65% to a new all-time high at $17.25. Metcash continued its rally and gained +3.83% as it reached its highest close since May 2018 at $3.25.

Meanwhile, non-essential retailers Myer slumped -44.12% t0 $0.095 and Lovisa -43.81% to $2.45.

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