It's been, frankly, a horror end to the trading week this Friday, in what has been in itself a horrible week to have been invested in ASX shares. At market close, the S&P/ASX 200 Index (ASX: XJO) lost another painful 1.77%. That puts the ASX 200's falls for the past week at a depressing 7.76%.
But is this the bottom for ASX 200 shares? After all, the old saying goes that it is always darkest before the dawn. And it certainly feels dark on the ASX right now.
Well according to reporting in the Australian Financial Review (AFR) today, one analyst reckons we could indeed be near the bottom of this market correction. That's Fundstrat Global technical strategist Mark Newton.
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Is the ASX close to a bottom yet?
Newton reckons that last night's (our time) sell-off on the US markets has brought share prices closer to a bottom. He also added the following:
Evidence of bearishness turning to capitulation has been growing, and I'm confident that markets are nearing a bottoming process which should be in place by the end of June… Cycles, counter-trend exhaustion tools, and very bearish sentiment are all coming together, suggesting markets can make a low in the near future, despite evidence of downward earnings revisions starting to just begin to ramp up…
While a choppy period over the next month might need to happen before a larger rally can happen, it looks right to position long into end of month, and initial lows could be in place by next Friday.
So this is certainly good news for ASX shares if Newton's predictions turn out to be accurate. The US markets and the ASX are closely correlated, and it's highly likely that if the US markets started to recover, the ASX would be close behind.
Inflation concerns continue to weigh on the share market
This sentiment is not universal though. The AFR also reported on another, less-bullish outlook, this time from AMP Ltd (ASX: AMP) chief economist Shane Oliver. Oliver reckons there is still a 50-50 chance of a global recession in the next 12 months thanks to the actions of central banks around the world in raising interest rates. "Either way it's still too early to say that shares have bottomed," he told the AFR. Here's some more of what Oliver said:
Energy prices – particularly for oil – are yet to put in a decisive top and it's hard to be confident that the worst is over for inflation until they decisively stop rising…
When combined with the surge in fixed mortgage rates, it would likely cause real problems for consumer spending, a big spike in mortgage stress and push property prices down by 20 to 30 per cent… which indicates it's unlikely to happen as it would crash the economy and ultimately push inflation back well below the RBA's target.
So some divergent outlooks on the ASX share market going forward. No doubt investors will be hoping it's the former opinion that prevails over 2022 and into next year. But we shall have to wait and see what happens.
