The ASX confounded offshore leads for the third day in a row today, according to Michael McCarth CMC Australia’s Chief Market Strategist.
In what McCarthy said was a “bear trap” this morning, the ASX opened lower but within an hour and a half drove sharply higher and closed up 41.3 points or 0.80% at 5,334.1.
The 90 point range was huge by local standards but the rally was lead by the banks which found solid buying support on the back of some very solid dividend yields, as this chart shows.
McCarthy told Business Insider that the key to the rally is that individual investors dominate the share registries of these companies – which make up around half the market capitalisation of the ASX 200.
And these investors “don’t respond to the signals pro investors do”, things such the weak retail sales and manufacturing survey this morning. They favour metrics such as the dividend yield.
For the technically minded, the move on the index was also important because with a lower low for the sell-off and then a higher high than the day before the market has had a key reversal.
McCarthy said it is too early to tell if the rally would be sustainable but we’ll know by week’s end.