• Wall Street was closed for Memorial Day, European shares were slightly down
  • Beware of “downside correction” in the US market, expert says
  • Rampant short-selling is putting pressure on the oil markets


Wall Street was closed for Memorial Day, and at 7.30am AEST the ASX 200 index futures was pointing down by -0.15%.

Last night, Republicans and Democrats began to lay the plans of passing the deal through Congress before the government runs out of money early next week.

European stock markets meanwhile finished mainly lower as traders assessed the implications of the deal.

The benchmark EURO STOXX 50 index was down -0.5%, with insurance and energy shares over-performing, and tech shares dipped on profit taking.

Volumes were thin overall as the London Stock Exchange was also closed for the Spring Bank Holiday.

Election news were the major headlines.

Spanish Prime Minister Pedro Sanchez has called a snap election, while in Turkey, the Borsa Istanbul 100 index rose by 4% after President Tayyip Erdogan sealed his victory in a runoff election on the weekend.


Beware of “downside correction” in the US market

The loop-sided “K-shaped” performance has continued to persist in the US stock market since its October 2022 low.

The benchmark stock indices, Nasdaq 100 and S&P 500, are heavily weighted by the mega capitalisation technology stocks (Meta/Facebook, Apple, Amazon, Netflix, Alphabet/Google, Microsoft, NVIDIA & Tesla), which have continued to outperform the rest by a wide margin.

Thanks to the current AI-driven optimism theme play, the share price of NVIDIA staged a spectacular single-day rally of +24% last Thursday that skyrocketed Nasdaq 100’s 2023 year-to-date return to around +30%.

“If we stripped out or normalised the weights of these mega cap tech stocks, the US stock market performance is just like a “speck of dust” where the equal-weighted S&P 500 ETF has turned negative by -0.02% for the year,” said Kelvin Wong, senior analyst at Oanda.

Wong believes that if such a “K-shaped” performance persists on the Nasdaq 100 and S&P 500, the odds are going to get higher that a downside correction may happen.


In other markets…

Crude oil prices rose another +0.4%, with WTI trading at US$72.96 a barrel.

Rampant short-selling has been putting a lot of pressure on the oil markets, which triggered Saudi Energy Minister Abdulaziz bin Salman to sound off this warning last week:

“Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don’t have to show my cards I’m not a poker player… but I would just tell them watch out,” he said.

Gold traded sideways at US$1,943.30 an ounce.

Base metal prices rose in Chinese trade on Monday, with Shanghai copper futures gaining 2%, and aluminium futures up 1%.

Bitcoin traders meanwhile took profits after yesterday’s 5% haul, driving BTC down by -1.6% in the last 24 hours.

Looking ahead to today, building approvals data will be released in Australia.

And according to Commsec, Atlas Arteria, Audio Pixels Holdings, Highfield Resources, Latin Resources and Neuren Pharmaceuticals will all host their AGMs today, while Wesfarmers will host a strategy day.


5 ASX small caps to watch today

Droneshield (ASX:DRO)
Droneshield says it has undertaken a significant production and operations ramp up following completion of its most recent capital raise in March. The company has scaled up the production, operations and deployment processes from dozens into hundreds of units across multiple complex products, simultaneously.

Alcidion Group (ASX:ALC)
The medtech company has renewed its contract with Royal Wolverhampton NHS Trust for two years, for the use of its Silverlink Patient Care System (PCS) solution. This represents the fourth contract renewal. The combined total contract value (TCV) is $3.3m over the respective renewal periods, and further bolsters Alcidion’s recurring revenue.

Australian Vanadium (ASX:AVL)
AVL and the Commonwealth government have executed a grant agreement under the Modern Manufacturing Initiative, providing a grant of $49 million to support the Australian Vanadium Project. AVL says the project is one of the most advanced critical mineral vanadium projects being developed globally, with the potential to produce 11.2kt per annum of vanadium pentoxide over a 25+ year mine life.

Tietto Minerals (ASX:TIE)
Matt Wilcox has been appointed CEO of Tietto Minerals, transitioning from his current role as chief operating officer. In his time as COO, Tietto has overseen the on-time and below budget construction and commissioning of the company’s Abujar Gold Mine. Meanwhile, Tietto founder and managing director Dr Caigen Wang is retiring from Tietto’s board.

Toro Energy (ASX:TOE)
First assay results have been received for hole BTDD007 at the Bang I Tum Lithium Prospect. Drilling confirms discovery of new pegmatite zones to the east and potentially to the west of the main zone. Results indicate higher Li2O grades compared to the Reung Kiet Mineral Resource Estimate. In addition to lithium, intersections also contain Sn and Ta mineralisation.