The XJO is expected to open lower this morning following near 8,830 at time of writing. This follows a big selldown in the U.S overnight, however their market managed to rebound from the recent key support to retake roughly a third of their intraday losses. In essence, though they sold down heavily, they remain in a tight consolidation range, perhaps helping to explain our fairly muted response this morning.
With the U.S largely tracking sideward, albeit with whipsaw movements, and not committing to a break lower, our market yesterday sheepishly recovered practically all of Monday’s selling. It seems Monday was potentially a false break, and that we may have bounced off the uptrend line (if you sort of squint enough). Today, we may test it again.
The RBA raised interest rates yesterday. The statement didn’t indicate much, leaving it up to the pundits to form theory on the future of monetary policy. Apparently, many are expecting another soon, perhaps as early as May. It is rather early to put too much stock in these predictions however, and plenty of data will come out between now and the next decision. Tabloids seem to be leaning into the drama of it all for now.
Regardless, the RBA moving to a tightening policy, even if just for the short-term, should spell bearish movement for our market. Rate cuts likely took the lion’s share of responsibility as to why our market has rallied over the past couple of years. A tightening cycle should have the opposite effect. It feels like the lights have been switched on, but our market is still dancing to a tune that is no longer playing.
US Markets
US shares closed lower overnight, with selling in technology, software, and AI related stocks dragging prices lower. Both Google and Amazon fell ahead of their reports tonight and tomorrow night respectively. US markets continue to butt their heads against the all-time high resistance, but there is enough negativity in the form of AI uncertainty, concerns about the US economy, and US domestic political instability, to prevent them from breaking higher. Still, in the absense of any major negative news, such as a miss on earnings from Google, Amazon, and Nvidia, we would expect an eventual break to the upside.
Five of the eleven sector groups of the SP500 closed higher overnight, with Energy, Materials, and Staples the best performers. Technology, Communications, and Healthcare stocks saw the most selling.
Technically, the SP500 returned to the all-time high overnight. It has recently stalled around the all-time high resistance at 7,000 multiple times before falling back off to the 50-day moving average and potential short-term uptrend line. This leaves the index inside and ascending triangle pattern between that short-term uptrend line and below the all-time high resistance. We would need to break either the short-term uptrend or the all-time high resistance before another directional move will look likely.
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