Summary:

• Stocks in Asia generally rose, although AUS200 took the beating
• CHNComp surged more than 3% after a long weekend
• The US500 has just scored all-time highs, are we braced for a year without a simple correction?

We got “more of the same” in Asia on Tuesday that is even stronger US dollar and generally upbeat market sentiment. It was especially the case in China. Generally China is “on vacation” this week but stocks in Hong Kong had only a single day off and surged heavily after the opening. The CHNComp rocketed up by more than 3% to end a recent mini slump, boosted by global sentiment and good news from the domestic economy. The PBOC announced a somewhat unexpected cut in reserve requirement ratio that should help especially cash strapped small and mid-sized banks. That move is contradictory to the policy that’s been implemented thus far this year (and especially go against housing market curbs) and it seems to be targeted at improving market sentiment ahead of the Party Summit that will take place later this month. Either way the Hang Seng CE (CHNComp on xStation platform) leaped forwards staying well within an upward channel and looking ready to retest highs from late August at 11400 points. 

CHNComp surged on Tuesday as markets in Hong Kong opened  after a long weekend. Source: xStation5

Wall Street saw another slate of a rally yesterday as the bulls were in charge after dealing with the key psychological level of 2500 pts. on Friday. There were no direct reasons behind this surge which took place a little bit out of nowhere but the truth is that just like China the US market stays well within the upwards trend. There is something else that could be even more stunning: the S&P500 (US500) saw a pullback of just 2.8% this year and if there’s no pullback that is larger than this in the final quarter we will see a year with the second smallest pullback ever (after 1995). Moreover if we assume that a correction occurs when we see at least a 5% decline between closing prices we may have a “year without a correction”, just the sixth one after the war (previous two taking place in 1964 and 1995). The S&P500 is also running one of the longest winning streak – the last 5%+ correction was a 10.5% pullback than ended in February 2016. It therefore looks like the Q4 could be a “make a break” period – either we see a long awaited correction or there are some records waiting to be broken. 

Are we braced for the first year without a correction in this century? Source: Pension Partners 

There is no DAX (DE30 on xStation) trading on Tuesday as Germany has a day off but Europe opened modestly higher, including the Spanish Ibex (SPA35) that is recovering after a slump yesterday.