The XJO is expected to edge lower on open this morning following a small sell down in the U.S overnight which saw their market rebound off key all-time high resistance intraday. Their futures are also marginally in the red.
In likely anticipation of a break higher last night, our market pushed higher to flirt with our own all-time high key resistance. We are also likely priming ourselves for the RBA meeting today at 2:30pm (AEST). As usual, the expected cut is baked in, and the market instead will be focusing on future guidance from Bullock. The market is expecting at least one more cut this year, but some investors believe there will be more. They certainly have helped drive markets higher with the expectation of further easing in monetary policy beyond what the RBA is projecting. Today Bullock could sober markets up. However, her tones haven’t exactly been dovish this year, and the market hasn’t seemed to care – it knows better apparently.
Tonight, we also have U.S CPI, which is expected to increase for the fourth straight month. Once again, this typically should lead to falls, as coupled with poor job numbers last Friday, shows a slowing economy but with rising inflation. However, their market too has been sticking their head in the sand.
It feels like markets are nearing a precipice. It’s been a while since we have seen a mean reversion back to the 50 day MA, or a broader correction back to the 200 MA. Regardless, we should continue to trade the technicals which have remained firm since the start of the year. The trend remains bullish; we continue to listen to the uptrend line and key levels of support/resistance. For the moment, we assume the market will break higher, with days to weeks of consolidation in between.
US Markets
US shares edged lower overnight, with the SP500 holding below its all-time high resistance level. US shares have been buoyed by weak data recently, which investors hope will cause the Federal Reserve to cut interest rates. US inflation data for July will be released on Tuesday night and this will have big implications as to whether the Fed will cut interest rates from here. Inflation is expected to continue slowly creeping up, with the Trump tariffs and extreme government spending pushing consumer prices higher. If inflation does come out stronger than expected, don’t be surprised to see selling in global equity markets.
Three of the eleven sector groups of the SP500 closed higher overnight, with no sector seeing notable gains. Energy, Real Estate, and Technology stocks saw the most selling.
Technically, the SP500 has stalled the all-time high resistance at 6,400. The index also held below this level on Friday so we will need to wait to see if it breaks before further upside will look likely. For now though, the index remains on an uptrend with higher peaks and troughs, so we must assume further upside from here.
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