The XJO is expected to open flat this morning. The U.S was up overnight, but our market has disconnected from a U.S which is plagued with a slowing economy and increasing inflation. Instead, we seem to be running our own race for now, with blinders on, having only eyes for further rate cuts.
This expectation of rapid expansionary monetary policy drove our market into fresh highs yesterday. We broke through the key resistance at 8,750, thereby also breaking the short-term channel, and the longer-term ascending triangle. We closed outside the shorter-term Bollinger bands, and considering the U.S has been lagging, it isn’t surprising to see our market pause this morning. Furthermore, it is quite rare for our market to make fresh consecutive highs. Instead, we often pullback the next day or within a handful of days of consolidation.
Like last time, we could simply track sidewards here. 8,850 could easily be the new resistance, however we will need to wait and see. Because our market is set to open flat, rather than selldown, we may simply pause here before making fresh highs. 8,750 is now the key support.
The break higher may also be a last hurrah before we head into earnings season next week. The market will have a hard time justifying what is likely to be stretched valuations. Though, it seems to be shrugging off any bad news at the moment. We also have a rate decision next week, where the RBA will likely cut rates. Our market will instead be looking for future guidance from Bullock and vindication for their expectation of further cuts before the calendar year is out.
US Markets
US shares rose overnight, with each of the three major indices closing firmly higher. US markets were buoyed by Apple, who rose 6 percent after a report that it had eased tensions with the Trump administration. President Trump said also he’s going to increase tariffs on India to 50 per cent, from 25 per cent because India refuses to stop buying oil from Russia. This big tariff jump did little to slow markets however. There isn’t much in the way of fresh US economic data this week, so instead markets will focus on earnings and the unscheduled news items. Momentum has shifted to bullish across the past few sessions, so don’t be surprised for US markets to head back to their resistance levels here.
Six of the eleven sector groups of the SP500 closed higher overnight, with Discretionary, Staples, and Technology the best performers. Healthcare stocks saw the most selling, followed by Energy stocks.
Technically, the SP500 has recently held the potential support at 6,220 and has bounce off this level. We have now seen some bullish signals to suggest the index will rise from here. The index remains on an uptrend, with higher peaks and troughs (though the uptrend line has broken). The first upside target would be the recent all-time high resistance at 6,400.
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