Volatility seems to have been put to bed over the past few sessions – markets don’t seem to be doing much.
The U.S was flat overnight, as are their futures currently. Our market yesterday closed flat after rebounding from the previous all-time high key resistance at 8,500, and we are expected to open flat this morning. It seems markets are digesting the current climate heading into the U.S CPI reading tonight.
With the rebound from key resistance yesterday, our market continues to trade in an ascending triangle. Unable to make fresh highs with any real commitment, but at the same time continuing to create higher troughs. We would typically expect the uptrend to win, and for fresh highs to be made, however we would likely need to see the U.S gain momentum first. With the CPI reading tonight, markets could easily see a spike in volatility depending on how they take it.
We are trading at the top of the range, flirting with the prospect of new highs. This also means however that we are in a good position to fall. If the U.S responds poorly, our market’s excitement around our own interest rate cuts expected next week may not be enough to hold us up.
Key support is roughly 8,450, which is also roughly where the uptrend line comes in. Beyond that is 8,400 and 8,350.
US Markets
US shares again opened lower overnight, but they rallied throughout the session to recover the early losses. Their eventual close was fairly flat. After US markets closed, US futures did dip a little due to Fed Chair Jerome Powell suggested that the Fed favoured a pause on interest rate cuts at the moment, due to stubbornly high inflation. US markets will get an inflation update tonight, with US CPI data for January, which could trigger movement; inflation is expected to lift a little in January. Regardless, US markets seem unconcerned with negative news, and there has been plenty recently. They seem content to keep grinding higher, and are being fed by extreme liquidity from the US government. Until US spending is reduced (unlikely) or inflation rebounds (more likely) markets are likely to hold up.
Technically, the SP500 has seemingly stalled out just below its all-time high resistance level which sits just above 6,100. We will need to wait and see if this level holds or breaks. To the downside, there is key support at roughly 6,000 points, which is also roughly where the uptrend line comes in. This leaves the SP500 inside an ascending triangle, waiting for a directional breakout.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Staples, Energy, and Real Estate the best performers. Discretionary stocks saw the most selling.
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