The selling for the Australian market does look quite overdone at the moment, given that overseas markets have seen far less selling than we have. However, it is also worth noting that the Australian market was and still is substantially overpriced and this creates conditions where we can see rapid selling.
Yesterday’s RBA mintues confirmed that the RBA is looking to end their rate cutting cycle. However, they showed that the RBA still expects another rate cut next year, which is better than some analysts, who are predicting a bottom for Australian interest rates.
The Australian market will now turn to Nvidia’s quarterly results, which will be announced tonight and the market will likely decide whether or not to rebound in the short-term based on the strength of these results.
Regardless, the Australian market does look heavily oversold in the short-term, so we would expect something of a rebound soon.
Technically, the XJO broke below several key levels yesterday including 8,500 and the 200-day moving average – we would need to see the market rise above these those levels for gains to look likely. We did close right around our June low at 8,450 which may now act as support. However, should we close below that level it would likely confirm that we are headed to an eventual correction of a 10 percent fall to 8,250. Still, most corrections like that take some time with a lower peak, and that could be something to watch for even if we bounce in the short-term.
US Markets
US shares fell fairly strongly overnight, with technology and discretionary leading the selling. It was the fourth straight day of selling for the SP500, the benchmark’s longest losing streak in three months. US investors were clearly nervous ahead of this week’s main event: NVIDIA’s report. Nvidia’s results will be closely watched by investors worried about market gains tied to AI exuberance. Nvidia’s shares were 2.8% lower overnight. The September U.S. jobs report is set to be released on Thursday after being delayed because of the long government shutdown. US markets rebounded from intial selling around midday before selling down again towards the close. US markets will now likely bounce from here or break for another leg lower based on the strength of NVIDIA’s report tonight.
Six of the eleven sector groups of the SP500 closed higher overnight, with Energy and Healthcare the best performers. Discretionary and Technology saw the most selling.
Technically, on Monday the SP500 broke below its uptrend line, below its support level, and below the 50-day moving average. That was a bearish signal, potentially suggesting we will see further selling to perhaps the major 6,550 support level. While the index didn’t quite reach that level in the overnight session, it could certainly do so tonight so we will need to watch closely for tonight’s session. A hold above 6,550 would indicate a rebound back to perhaps 6,750. A break below 6,550 will indicate further selling.
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