The XJO is expected to open flat this morning. The U.S was up overnight, however they went through another night of indecisive and volatile trading which saw them both give up gains and retake losses intraday. Our market, comparatively, managed to lock in solid gains and finish practically near all-time high resistance yesterday. Furthermore, U.S Materials and Financials were mildly in the red, and their futures are flat. With their mixed trading overnight that spells uncertainty, flat futures, and meek moves in the Financials and Materials, it is not surprising to see us pause here.
9,000 – 9,050 represents all-time high resistance. For now, we expect these levels to hold. It would make sense to see our market either consolidate here at the top of the range, or see some profit taking. We may reach 9,050 before doing so, however. 8,880 is a key level of support that was also the resistance during the stretch of consolidation we went through for most of September.
We have local employment data today. Unemployment is expected to increase from 4.2% to 4.3%. Other key metrics are also expected to weaken. This is in opposition to the RBA’s belief that the economy is ticking along well. This was reaffirmed in the minutes from their last meeting which were released on Tuesday.
We are still in a world where bad news is good, as it increases the likelihood of expedited rate cuts. The market has shown it cares little for what Bullock says, and in the past, it has largely been vindicated. So, if employment data comes in softer than expected, our market could easily continue the move higher or at least hold ground.
US Markets
US shares had a nother wild back-and-forth session overnight, which ended with the average stock finishing slightly higher. In some ways the market may have seen the trade war as a positive thing (lol) after comments from Federal Reserve governor Stephen Miran, who said there are “now more downside risks than there was a week ago”, pointing to the back and forth trade moves by China and the US. The market will interpret this to mean a greater likelihood of rate cuts. Overnight Morgan Stanley reacted positively to its earnings report, with the bank rising 5 percent on the result, while Bank of American also rose after reporting results. Still, there is plenty to worry about for investors, with trade tensions between the US and China unlikely to subside in the immediate. Indeed, overnight U.S. President Donald Trump said he was considering cutting some trade ties with Beijing in response to China not buying U.S. soybeans. Additionally, there is the ongoing US government shutdown, which means that most economic data is currently not being reported.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Real Estate, Utilities, Communications, and Technology the best performers, perhaps in anticipation of rate cuts. Materials and Industrials stocks saw the most selling.
Technically, its kinda hard to form a view on the SP500 at the moment. Despite a break of the uptrend LINE on Friday, the index remains on an uptrend and will remain so until it starts setting some lower peaks and troughs. The index does look very overbought, which perhaps exacerbated Friday’s breakout. With the breakout on Friday we might see a move to the 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, which may also act as support. 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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