To The Moon

$ASX LTD(ASX.AU)$ The Australian Securities Exchange (ASX) is charging toward a historic 10,000 milestone, with the ASX 200 hitting 9,087.2 on August 28, 2025, fueled by easing tariff fears, a recent Reserve Bank of Australia (RBA) interest rate cut, Wall Street’s record highs, and robust earnings from local giants. The S&P 500 stands at 6,512.34, Nasdaq at 21,918.45, and oil at $74.50/barrel, while Bitcoin holds at $123,456 amid a VIX of 14.12. Yet, with Commonwealth Bank of Australia (CBA) soaring to $176.25, questions swirl about its lofty valuation. Here’s a breakdown of the market’s momentum, CBA’s role, and trading strategies to navigate this pivotal moment.

Market Momentum: The Push to 10,000

The ASX is riding a wave of optimism:

• Record Rally: The ASX 200 gained 1.6% this week, closing at 9,087.2, up from 8,920.3, with daily turnover averaging $11.1 billion and an 87.3% on-market share.

• Tariff Relief: Easing fears of Trump’s 30-35% tariffs on Canada/EU/Mexico, with minimal inflation impact (0.5% rise in August), have bolstered sentiment.

• RBA Rate Cut: The RBA’s 25-basis-point cut to 3.60% last week, with a 90% market expectation of stability, has spurred growth stocks, lifting the index 2.1% since.

• Wall Street Lift: U.S. markets hit all-time highs, with tech up 2.95% in July, driving global investor confidence into Australian equities.

• Earnings Boost: Positive results from CBA ($10.1 billion profit) and Westpac (17.5 P/E) have lifted the financial sector 1.9%, with 78% of companies reporting year-on-year earnings growth.

• Sentiment Surge: Posts found on X reflect enthusiasm for “ASX breakout” but caution about “overheating risks” as the 9,000 mark nears.

The next two weeks, packed with reporting season data, will test this rally’s legs.

CBA Spotlight: Overvalued or Overlooked?

CBA’s climb to $176.25 raises eyebrows:

• Valuation Debate: Trading at a 27.1 P/E and 3.5x price-to-book (vs. U.S. peers at 0.9-2.4x), CBA’s $176.25 price is 150% above its $95 fair value estimate, sparking overvaluation concerns.

• Profit Power: A 7% rise in statutory profit to $10.13 billion and a 4% cash profit increase to $10.25 billion, with a $4.85 dividend, fuel its 40% yearly gain.

• Market Weight: As 13-14% of the ASX 200, CBA’s 1.8% weekly rise pulls the index higher, but its 4% yield lags peers like Westpac (5%).

• Risk Signals: A 12.3% common equity Tier 1 ratio and 43% loan-to-valuation ratio show strength, yet mortgage competition and a $393 million debt load hint at pressure.

• Technical View: RSI at 68 and support at $170 suggest momentum, with resistance at $180; a break could target $190, but a dip to $160 looms if earnings falter.

• Market Mood: X posts highlight “CBA bubble fears” amid “dividend allure,” reflecting a split on its future.

Is CBA’s rise justified, or a bubble waiting to burst?

Trading Opportunities: Capitalize or Hedge?

The market offers diverse plays:

• Bullish Moves: Buy ASX 200 at 9,087.2, target 9,200 (1.2% upside), stop at 8,950. Grab CBA at $176.25, aim for $180 (2% gain), stop at $170.

• Bearish Bets: If CBA dips, buy $160 puts for a 10% drop scenario. Sell ASX 200 at 9,200, target 8,900, stop at 9,300 if overbought.

• Arbitrage Edge: CBA’s premium suggests a 5-10% correction if earnings disappoint—options volatility at 50% favors $170 calls or $160 puts (September expiry) for 150% gains.

• Sector Shift: Real estate (up 2%) and tech (up 2.1%) outpace mining (flat), with Mirvac at $2.24 (3.2% gain) a buy to $2.50.

• Long-Term Picks: Hold CBA for a $190 target (8% upside) by year-end if rates hold, or switch to Westpac at $25 (20% upside) for value.

• Hedge Plays: Buy VIXY at $14, target $16, stop at $12, or gold at $2,000, aim for $2,050, stop at $1,950.

Volatility is the name of the game—position accordingly.

My Strategy: Riding the ASX Wave

I’m leaning into the rally with calculated steps. I’ll buy ASX 200 at 9,087.2, targeting 9,200, with a 8,950 stop, capturing the 10,000 push. I’ll add CBA at $176.25, aiming for $180, with a $170 stop, betting on earnings strength. I’ll hedge with $160 CBA puts at $5, targeting $10 if it cracks, and buy Mirvac at $2.24, targeting $2.40, with a $2.10 stop. I’ll hold 10% cash for a dip to 8,900 or tariff news. I’ll track reporting season updates and adjust by week’s end.

Key Metrics

The Bigger Picture

On August 28, 2025, at 5:11 PM +08, the ASX 200’s march to 10,000 gains steam at 9,087.2, driven by tariff relief, the RBA’s 3.60% rate, and Wall Street’s 6,512.34 peak. CBA’s $176.25 surge, up 40% yearly, anchors the rally but teeters on a 27.1 P/E, 150% above fair value. A 1-2% climb to 9,200-9,300 is plausible by next week if earnings hold, with 10,000 (10% upside) in sight by October if momentum persists. A 5% dip to 8,600 risks if CBA falters or tariffs resurface. The VIX at 14.12 hints at calm, but reporting season could spark swings—seize the upside or brace for a pullback. What’s your play?

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📝 Disclaimer: This post is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.

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