The XJO is expected to open lower this morning following a mixed night of trading in the U.S overnight which saw their market finish firmly in the red.
The U.S returned to their 200 day MA overnight. They rebounded from it intraday to retake almost a third of the session’s losses. Most of the damage was done in their Financials which fell 3.54%. This should directly feed into our banks today. Their Materials didn’t fare well either, falling 1.38%, which also seems likely to put some pressure on miners today. However, U.S Futures have moved aggressively in the green. It looks like Ukraine and the U.S will have another go at peace talks, a welcome relief following the breakdown over the weekend. There are also rumors that there may be some compromise on Trump’s tariffs.
Their strong futures should mitigate our losses this morning, with an expected open near 8,150 – the key support we have been grinding along the past few sessions. Our miners have lamented for a while and are now trading at key support levels. RIO and BHP were both up overnight so despite U.S materials falling overnight, we may see some stability the miners. They may indeed offset any selling from the banks if the XJO index tries to hold ground with the expectation of a strong rally in the U.S overnight.
The short-term downtrend line remains in play, representing the bearish pressure on our market. However, 8,150 seems to be holding for now, and we are practically trading at the comfort of the 200 day MA. We see a similar situation in the U.S too. Don’t be surprised if we see 8,100, 8,050 or even 8,000. Things are very delicate at the moment. Markets have whiplash from the sheer velocity of news coming out of the white house. Any negativity can easily be reversed, and any hopes can be dashed as quickly as they arrive. It makes markets hard to predict.
That being said, it seems likely that our market trades in a broad range. Its hard to suggest we have seen the floor, but unless anything dramatic happens, it feels we are near it. When we see the relief rally, 8,300 to 8,350 and back to the 50 day MA seem the most logical target – but considering the current global climate, it would be hard to expect anything more than that.
US Markets
US shares closed lower overnight as Trump introduced tariffs against Canada and Mexico, and increased tariffs on China. These countries responded with tariffs of their own. Trump is also threatening tariffs on Europe, though there are some whispers that a compromise could be found there. These whispers have triggered a rebound in US futures, which currently sit a little higher. It was a wild session overnight, with back-and-forth movement, but in general, markets are definitely taking a view that tariffs are not good for the economy or for share prices. Further movement from here will come down to news around Trump and tariffs. Should these tariffs remain in place for any period of time, the economy will rapidly weaken and things will start heading towards a recession. However, any news around potential compromises or deals are likely to be bought up.
Only one sector of the SP500 managed to close higher overnight, which was Technology, even then it was pretty much flat. Every other sector saw strong selling, with Financials the worst performers, followed by Industrials, Staples, and Utilities.
Technically, the SP500 broke below the support around 5,850 index points and below the next potential level of support around 5,800. The index now looks like continuing to fall to the lows of October and November, around 5,680-5,700 index points.
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