ASX Down: Australian Shares Sink at the Open, Is the Worst Behind Us?

The ASX Down and Global Politics

If you’ve been paying attention, you’ll know that the Aussie government has got themselves into a bit of a pickle.

Just 10 days ago, PM Scott Morrison was advising people to go to the footy.

He then said that supermarket hoarders must stop. There is nothing wrong and to continue life as you normally would.

So that’s what we did…we continued about our daily lives.

So why is it that over the weekend police were called in to close down Sydney beaches?

Bit of a backflip, don’t you think?

Well, turns out we do have a bit of a problem. And it’s much bigger than the PM originally anticipated.

Aussie shares took a nose dive this morning, too. The ASX fell around 8.5% at the open.

And now, Australia is ushering in more stimulus and draconian lockdowns.

What on Earth is going on? Today, we’ll take a look!

But first, let’s take a look at the numbers…

COVID-19 update

There are over 304,000 confirmed cases of COVID-19.

The Chinese Wuhan virus has also killed around 13,000 people.

Australia currently has over 1,000 cases.

China has around 81,000 cases, which have plateaued since 4 March. I don’t believe it for a second!

Today at midday, Victoria, NSW and the ACT have closed down all non-essential services, indefinitely.

This will mean only supermarkets, petrol stations, pharmacies, convenience stores, fright/logistic services and home delivery services will remain active. Plus a few other essential services like the banks.

It’s a little too late for this kind of behavior. Australia’s borders should have been forced closed back in January. That’s my opinion and I called for it many times.

States across Australia are talking about closing down their borders. This will also restrict interstate travel for individuals.

Some European countries have already gone into complete lockdown.

If they’re anything to go by…we’ve still got a long way to go.

Well, that’s the state of the world today…in a nutshell.

What does all this mean to your investments?

Well, let’s take a look at the charts.

Take a look at the XAO below…

The XAO in free fall!

ASX XAO Down - XAO Share Price Chart

Source: TradingView

[Click to open in a new window]

What you’re looking at is the monthly chart of the Aussie top 500 (XAO).

I’ve added some annotation to the chart.

It covers the 1987 collapse, 2007 crash and today.

In 1987 the markets fell 50.09% over two months with an angle of –87 degrees.

In 2007 the markets fell 55.03% over 16 months with an angle of –82 degrees.

COVID-19 has caused the Aussie market to shed 38.93%, so far. And this is over one month with an angle of –89 degrees.

This is the sharpest fall Australian shares have experienced over the last 40 years.

And to put this into context…-90 degrees is a free fall down. It’s a straight line down.

Right now, it’s important to stay in cash. Bottom fishers will definitely be wiped out. I think this still has a little longer to play out.

It may pay to just be watching from the sidelines for now.

As always, this is not a recommendation to buy or sell the market. It is an update only. I hope you found it useful.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

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