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Note from the MD: Markets end worst month since January with a 75-point drop

June 1, 2022

Note from the MD: Markets end worst month since January with a 75-point drop

The market struggled on the final day of the month, with the benchmark ASX 200 index (XJO) giving up 75.4 points (1%) to close at 7211.2 – marking the worst month since January.

The market struggled on the final day of the month, with the benchmark ASX 200 index (XJO) giving up 75.4 points (1%) to close at 7211.2 – marking the worst month since January.

It was red across the board with every sector finishing the day in negative territory, making it the 11th trading session this year with losses across every industry.

All in all, the XJO finished the month 3% lower than it started. The tech sector played a big role in that result, giving up 8.7% for the month and bringing its losses since the start of the year to almost 30%.

At the smaller end of town, however, things were looking a bit brighter. The Emerging Companies index (ASX: XEC) – which tracks businesses ranked 350th to 600th by market capitalisation – finished the day up 0.47%.

That’s brought the index’s one-year returns to 11.12%, well above the XJO’s 0.69% at market close on Tuesday.

The XJO managed to hold price action above the current 7200 support level so far this week, after following the US’s Friday lead and gapping slightly higher on Monday’s open. Yesterday we saw a significant retracement of Monday’s gains, however the 7200 support level held up.

The market looks ready to hold above this level during today’s session as well. With the 50-day MA and 200-day MAs trading around the 7340 resistance level, we expect a strong resistance around 7340, with the next resistance at 7400. Should the 7200 support be broken, we expect to see the next support level around 7130, then 7065.

In commodities markets – an area we’ve been watching with a keen interest since inflation started picking up pace earlier this year – prices are still climbing, especially for grains.

On the hard commodities front, BlackRock this week signalled it expects to see further upside, noting China has lagged behind its stated goal of growing its economy 5.5% this year due to COVID restrictions.

As the country reopens its industries and looks to restart down that growth path, we could see demand for key commodities ramp up.

With supply chains already stretched, Reach Markets sees several opportunities emerging within this commodities space.

Volatility is back in the market and this sets the stage for one of the most popular strategies used by options traders – the IRON Condor. We have identified some ideal set-ups, out of millions of scenarios, to demonstrate how this strategy works during high market volatility. 

Tonight at 7pm (AEST), we are hosting a special webcast together with industry leader Ivan Tchourilov, where we will educate you on how to optimise the probabilities and improve the expected returns and profitability of your IRON Condors, including how it compares with other trading strategies. Click here to register for the session.

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Any advice provided by Reach Markets including on its website and by its representatives is general advice only and does not consider your objectives, financial situation or needs, and you should consider whether it is appropriate for you. This might mean that you need to seek personal advice from a representative authorised to provide personal advice. If you are thinking about acquiring a financial product, you should consider our Financial Services Guide (FSG) including the Privacy Statement and any relevant Product Disclosure Statement or Prospectus (if one is available) to understand the features, risks and returns associated with the investment.

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