The XJO is expected to open significantly higher this morning following a massive rally in the U.S overnight.
Trump backed down from all the heat and their market was ready and waiting to spam the buy button. The SP500 rallied almost ten per cent overnight. This should feed directly into our market with an expected open near 7,850. We did not fall as much as they did since both the selling began from the all-time highs, and from when it was renewed a week ago. At this stage, this is translating to about a six to seven per cent rally for our market. It would be hard to expect much more today, but alas, these markets are not lacking in surprises.
7,850 is where the downtrend line comes in. It is also an interim support. Otherwise, 8,000 is the next key level, represented as the most recent peak before the selling was renewed a week ago.
With Trump backing down and bending the knee to the real masters – capital markets, the markets seem primed to continue higher or at least consolidate. The trade war with China rages on, but China may feel reluctant to keep up the fight now that it doesn’t have the rest of the developed world putting pressure on the U.S too.
US Markets
Well, what can you say? Trump has backed down on the tariffs after achieving nothing but economic damage. Tariffs against China will remain in place, but tariffs on other trading partners will be paused for 90 days. What we have seen is the behaviour of a madman. Markets were likely going to fall significantly further overnight with cracks appearing in the bond market, but that proved not to be the case with a huge jump after the tariff back-down. It is very hard to say what will happen from here. Tariffs against Canada, Mexico, China, and on steel and aluminium remain in place. Tariffs on the rest of the world will be at 10% during the pause. Even if tariffs were to hold at these levels, it would do immense damage to the economy. For that reason, don’t be surprised if selling re-appears.
All eleven sector groups SP500 saw major buying on the reversal overnight.
Technically, the SP500 has pushed back up overnight with the index now looking like rising to the downtrend line, which currently sits around 5,580.
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