The XJO is expected to edge lower today, with the futures pointing to a drop about 15 to 20 points on open to just above 8,600 index points.
However, don’t be surprised to see a bit of a rebound after open today with US markets also rebounding on Friday, and with Trump removing some tariffs over the weekend.
The XJO saw strong selling last week which was driven by selling in US markets as well as a fear that the RBA might not cut interest rates again. US markets are also worried the interest rate cuts might be drying up. Markets love rate cuts, but it is clear that the current cutting cycle will soon come to an end, this could mean a period of selling for markets.
Also denting sentiment is the recent Australian bank reporting, which was poor, and which could herald the end of the banking uptrends. For this to happen though, we might need to see some more strength in the miners, but iron ore prices have languished across the past week.
The RBA meeting minutes will be released tomorrow and that could provide a reminder to the market that rate cuts are off the table for now, so do be wary about that event.
Regardless, we would expect a bit of a bounce for Australian shares here, given the recent strong selling that was in excess of what was seen in other parts of the world.
Technically, the XJO closed right on the major support 8,630 today Friday. The futures do have us breaking below this level on open today. However, we would expect a hold of this level and then a potential bounce. Should the market close higher today we might expect a recover back towards the 8,740 level, which was previously support and which may now act as resistance. Should the market close below 8,630, we would expect a fall to the next level at 8,540.
US Markets
US shares fell strongly on open on Friday, but they recovered throughout the session to finish only moderately lower. Still, US markets look very nervous -the belief that the Fed will cut rates despite a solid looking economy is now looking very questionable. Additionally, there is plenty of fear that massive AI spending will no translate to profits and that the arms race in spending means that some companies will need lots of debt. NVIDIA and Microsoft both rose one percent and helped the market to recover some of the losses. NVIDIA will report this week and that could be a major factor in whether markets see a rebound or whether things keep falling from here. Over the weekend, Trump removed some tariffs and that could be a bullish factor for markets tonight.
Four of the eleven sector groups of the SP500 closed higher on Friday, with Energy the only standout performer. Materials, Financials, and Communciatons saw the most selling.
Technically, the SP500 initially traded below its uptrend line on Friday but it recovered to close above the trend line. This is also roughly were the potential support and 50-day moving average sit, around 6,730. The index would have to see another red session for further selling to look likely. The index may have now set a lower peak which could point towards a change of trend. We will need to wait and see if we see a lower trough though. Should these levels break we could see a move to the next level at 6,550.
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