The XJO is expected to open flat this morning.
The U.S shed most of their intraday gains on Friday night, but still finished marginally in the green. However, our market remains peevish and sulky following the strong CPI numbers last week which removes any hopes of a rate cut tomorrow, or even possibly this year.
On Friday our market tried rebounding from key support at roughly 8,880 on Friday. However, by close we had given up all of our intraday gains to finish flirting with it once again. This level has proven to be key. During much of September, it was the key level of resistance and the top of the channel. We used it as support in October, and it we have done so again recently. We should expect it to hold for now, especially considering the 50 day MA also comes in at similar levels.
With our market trading near the 50 day MA, it can be considered neither overbought nor oversold by that short-term metric. The average trader is buying/selling the index for the average price it has traded at for the past 50 sessions, or about a quarter. Therefore, the average trader is not buying/selling the index right now for neither a discount, nor a premium. Thus, the market is trading at short-term equilibrium.
The market is also trading in a long-term uptrend. An uptrend line may be hard to place – perhaps if one were to squint at the screen it may be easier to see, but regardless, the market continues to make higher peaks and troughs. For now, we should continue to assume the market will rise in general, until we see at least a couple lower peaks and troughs that signal a change in trend.
If 8,880 does indeed fail, then the lows of our market are at 8,750, which seems the most reasonable target. Though there is some interim support at roughly 8,800 it may pause at first.
The big news in the week ahead is the RBA meeting tomorrow at 2:30pm (AEST). The RBA likely won’t cut rates, but the market will instead be looking to the RBA statement for any clues on when the next cut might be. The RBA usually keeps its cards close to its chest though, so it would hard to expect much to come about of it.
US Markets
US shares closed higher on Friday after a strong earnings report from Amazon. However, though prices opened well, they sold down throughout the session to finish around the intra-day lows. Perhaps this is due to the US government unable to resolve the government shutdown as they headed into the weekend, meaning this shutdown will be the longest ever. Plenty of food stamp recipents will now be cut off. US markets are seemingly being held up by a strong earnings season at the moment, with the wider macro economic news a bit more negative. However, likely US markets will only remain in a bullish frame of mind with more FED rate cuts expected. The market is pricing in a December cut, but should data (which is mostly not being released at the moment) start to reduce the chance of that rate cut, it is likely US markets will see some selling.
Five of the eleven sector groups of the SP500 closed higher on Friday, with Discretionary the best performer after Amazon’s results. Energy stocks also fared well. Materials and Utilties stocks saw the most selling.
Technically, the SP500 has been on an uptrend and potentially an acsending channel. The index seemingly reacted to the upperbound of the channel early last week and been falling since then. Even with Friday’s gain, the market didn’t show a bullish signal and still looks like heading lower in the short-term. This indicates a technical signal for selling to the previous resistance level at 6,750. The recent peak also conincides with the round number of 6,900, which may now be resistance. Given the overall uptrend, we would expect a bounce from that level.
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