The XJO is expected to open practically flat this morning despite a rally in the U.S on Friday. Our muted open is likely because we had already outpaced the U.S on Thursday, making fresh highs whilst their market tracked sidewards. Despite their rally Friday night, and our selldown on Friday, we have still relatively outpaced them in the short-term.
Employment data came in poor on Thursday, and it was enough for our market to believe the RBA will bring forward their plans for the next cut. We had a kneejerk rally in response. However, we likely got a bit ahead of ourselves, and are now perhaps seeking confirmation. On Friday, we practically gave up all of Thursday’s kneejerk rally. We settled on roughly 9,000, a key level that roughly represented our all-time highs alongside 9,050. It seems we are happy to use these levels as support for now. Furthermore, the U.S is still trading at their key support, whipsawing sidewards, and we are likely reluctant to outpace them.
It seems unlikely our market gets any confirmation this week in the way of key macroeconomic data. It will be relatively quiet until Bullock speaks on Friday. Even so, we tend not to care too much what the RBA says and price in cuts at our own pace. And often the market is vindicated.
In the absence of data, it seems likely we consolidate and be influenced by U.S moves. If the U.S holds ground, and rallies, it seems likely we will too. If the U.S sells down, then we may do so as well, though we are likely to remain resilient.
8,880 is the next key support, and roughly where the 50 day MA comes in – logical targets for any selling. Though, at this stage, it seems more likely that we rebound from 9,000 key support and make our way back towards 9,100 this week.
This week will be fairly quiet on key reporting. The big news comes Friday night with U.S CPI data. However, our market won’t have a chance to react to that until Monday.
US Markets
US shares closed higher on Friday, with prices initially opening lower before recovering to finish around the highs of the session. The rebound came with Trump toning down his aggressive threats to China on tariffs. Trump also stated that negotiations with China were progressing well, and that it looked like he would meet with President Xi Jinping later this month in South Korea. Overall with this news, US markets look set to rebound back to their highs in the short-term. Is this another case of Trump creating an issue and then solving it? Making it seem like he is making progress when its simply a spinning of the wheels? Hard to say, but regardless, he’s doing a good job of distracting the market from the fact the government remains shut down, which means no economic data is being reported. It has been announced that US inflation will be reported this Friday, but this may be cancelled yet again. The government shut down is also likely dragging on economic growth, but of course we can’t be sure without economic data. Usually markets would see some negativity around such uncertainty, so this goes to show how unbelievably bullish markets are at the moment.
Nine of the eleven sector groups of the SP500 closed higher on Friday, with Staples, Financials, and Energy the best performers. Utilities and Materials closed lower.
Technically, its kinda hard to form a view on the SP500 at the moment. Despite a break of the uptrend LINE recently, the index remains on an uptrend and will remain so until it starts setting some lower peaks and troughs. The index does look overbought, but it can remain overbought for a very long period. With the break of the uptrend line, we were expecting a move to the potential support level of 6,500, which was a previous level of resistance, and which may now act as support. This is also where the 50-day moving average sits. However, so far the index has held above this level, with last week’s lows at roughly 6,550. This is a bullish sign technically for the index, potentially signalling another higher trough in the overall uptrend. Assuming these levels hold, we would anticipate a bounce back to the all-time high resistance level of roughly 6,750.
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