RED FLAG: Bottom Picker’s all in a tizz. Here’s why he’s a bit worried about this debt ceiling business… and lithium stocks
Each week, Stockhead’s resident day trader gives us a peek at the highs and lows of his trading diary and hints at what might be coming this week.
Today, however, he’s taking a break from trading. Something’s not quite right on the ASX this week. Especially the big caps…
As we came into the last few hours of trading yesterday, the volumes in some of the ASX heavyweights were low. Frighteningly low.
Seeing as it was a market holiday on Wall Street last night and the fact that headlines are suggesting they have reached an agreement on their debt ceiling, then you would have expected some solid support.
But it is not showing through and this is of a concern to me. This is only my opinion, but I believe not true buying is a bit like a buyers’ strike.
Even on holidays, the likes of Goldman Sachs will still have a trading desk open somewhere, so it feels like we are heading towards a downward movement.
Things like RIOs had only a volume of 300,000 at 2.09pm on a range of $109.13 to $110.38. CBA’s volume was only 627,000 on their range of $99.70 to $98.92 as at 2.12pm.
At that point I was wondering how they would actually close. If their volumes started to pick up with falling prices, then that to me is a bit of a major concern.
And so they did.
All of this points to today being a disappointing one, though for the sakes of most of you I hope I am wrong.
If I am right though, then I think next week it’s possible CBA will be back to trading with a $95 or even $93 at the front of their prices and the likes of BHP at below $40 and RIOs heading towards $101.
Sure we have had the USA in their debt ceiling pickle before but this time the headlines and the drama has been far greater broadcast than just financial headlines. It got into the mainstream, and that, to me, could lead us into a bit of a sucker’s rally.
Bond prices have reacted a bit sharper in the short term maturities compared with the long 10 year benchmark bonds and now an enormous amount of liquidity is going to be diverted towards the USA now funding this new ceiling.
Not that I am sceptical of all of this but part of the negotiations means that the USA tax department will be starved of much needed funds, which it had budgeted for and they were to be used to look into the elite and wealthy avoiding their tax obligations.
I think this last bit will irk a few supporters and will make it harder to get voted through.
The other thing which is unique to Australia and not America is it’s coming towards 30th June – tax time – and a falling market will only be added to as tax loss selling snowballs.
If you look at Sayona (ASX:SYA), whose volume was 146m (2.15pm) after their placement to raise $200m a 18c had just gone through, this doesn’t bode well for some of the so-called lithium darlings of the market.
Such a dilution, when they already have 8.9bn shares on issue, is pointing to them and others creating an ever-decreasing circle as they chase funds to develop or improve their mines.
Looking at SYA at one stage yesterday, they had 35m on the bid at 18c from 700 different buyers and 21m on offer at 19c from 90 different sellers (2.21pm). So even though they have had a massive turnover, the queue to get in or out is just too large.
Any real falls on Wall Street and you can guess which way they are going.
Luckily for me, I have made some very good coin out of IEL over the Monday and yesterday but even their volume has dried up – 6.38m yesterday and only 1.94m today (2.25pm). To see how good you will have to wait till all my weekly trades have been published next Monday.
I hope I am wrong but my gut tells me I am not.
Please don’t shoot me though, I am just a humble day trader!