The XJO is expected to edge higher on open this morning. The U.S had a stella night, but we have already priced that in. Yesterday we had a strong run higher on the back of the ceasefire, which was spurred on by positive U.S futures that heralded their strong move overnight. Coupled with us now being back near all-time highs, flat U.S futures this morning, and the ceasefire already on the rocks, our market seems reluctant to rally any further.
Roughly 8,600 is the key level of resistance that represents our all-time highs, and 8,450 to 8,500 is the support that represents the bottom of the recent selling. For now, that seems to be the range as we consolidate.
If we are to break through resistance and make fresh all-time highs, it seems likely it will be on the back of increased expectations of interest rate cuts, both local and in the U.S. The ceasefire (albeit tenuous) seems to have spurred markets on for now, but the rally should be short-lived even it the ceasefire does indeed hold.
There are plenty of good reasons for markets to be trading lower, however, we have shown extraordinary resilience since roughly April. The conflict between Iran and both Israel and America barely put a dint in our market. The selldown seemed very reluctant.
For now, it is hard to suggest anything other than sidewards, or even higher if the market refocuses on potential rate cuts.
US Markets
US shares closed firmly higher again overnight with a ceasefire between Israel and Iran. Both sides appear to have broken the ceasefire, though it seems like it might now hold. US markets were optimistic with the ceasefire, but were perhaps somewhat checked by comments from Fed Chair Powell that that there’s still no rush to cut rates and from data showing that US consumer confidence continues to falter. Powell reiterated his view that tariffs would push inflation higher in the months ahead. Still, many are forecasting that the Fed will cut rates again in September, though this is no certainty, especially if the PCE (inflation) data from the US on Friday comes in strong. That PCE data will be the most important data point this week, and will likely determine if US markets reach their all-time high or not in the short-term.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Technology and Financials the strongest performers. Most sectors saw notable buying, with only Energy and Staples closing lower.
Technically, the SP500 bounced from the key potential support level at 5,975 – 5,970. With a bounce from these levels the SP500 looks further bullish from here, perhaps all the way to the all time high at 6,150.
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