The XJO is expected to open flat to lower this morning at roughly 8,630 at time of writing. This follows another tumultuous night of trading in the U.S which saw their market shed intraday gains to finish once again in the red (albeit marginally). Their futures are flat.
Yesterday we sold down, with most of the damage happening on open. We finished just below 8,650 support, though one could argue we are still flirting with it. It could also be argue that this morning’s flat open is indeed holding it as support. This makes sense considering the level was our recent consolidation’s resistance.
Our market continues to largely be driven by how the U.S trades, and their market seems very reluctant to break through their all-time highs. They instead seem happy to continue grinding sidewards at the top of their trading range, likely waiting for another slew of data this week.
Tonight, they have employment figures, retail sales numbers, and PMI data. On Thursday night, they have CPI numbers. They will be weighing these releases against the Fed’s future guidance on monetary policy and intention to implement QE from last Thursday.
It is hard to suggest which way they will break, and in turn, how our market will perform. Though, it does seem reasonable to suggest that we should expect volatility to return soon. Our volatility index (XVI.ASX) is trading at least ten per cent below quarterly, half year, and full year averages. Coupled with a month that usually sees movement, and that both our market and the U.S have largely tracked sideward for three weeks, the key data being released this week should drive movement.
Today though, it would be hard to expect too much movement unless U.S futures start moving during our session.
US Markets
US shares closed lower overnight, with strong futures during our session yesterday failing to materialise into upwards movement. It could be that now that the interest rate cut has happened, investors are worried that the good news is out of the way. It could also be investors looking to lock in profits ahead of the Christmas period. Investors might also be a bit cautious ahead of some major data this week, including nonfarm payrolls, and retail sales tonight and consumer inflation data on Wednesday night. All of this data could shift markets either way, but the inflation data is perhaps the most important, should inflation remain sticky, US markets will likely fall. Regardless, US markets remain uptrend so we have to assume they will continue to grind higher until a potential disruption. However, don’t be surprised to see very slow upside movements from here, while a downside move, if driven by news, could be large.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Healthcare the best performers, followed by Utilities, Technology stocks saw the most selling.
Technically, despite the recent gains, the SP500 is still stalling at the all-time high peak from October. We will need to see the SP500 close above 6,920 for the bull run to look to continue in the short-term. Should the market close above 6,920, that could be a signal for a rise to the round number of 7,000 points. The good news now looks to be mostly out of the way though, so gains from here might be slow. Should the selling resume, perhaps with a break below 6,800, we could see a move back to 6,550 index points.
Want to continue reading?
This is only an excerpt from todays TradersCircle Members Morning Market Update and doesn’t include the key data and charts our traders are keeping an eye on every day. Become a member today for this plus full length mid-day and end of day updates, trade recommendations, trade group webcasts, and much more!