The XJO is expected to open flat this morning following a similar night in the U.S. Their futures are also flat.
Yesterday pulled back and flirted with support at 8,150. We managed to retake some of the intraday losses but kept of the opening falls. The pullback looks like the beginning of an evening star reversal pattern which would indicate further bearish movement. However, in this environment, we would almost certainly need to see the U.S fall too.
There is a tentative uptrend line in play that began from our lows at the start of August that comes in at roughly 8,075. If we consolidate sideward for the rest of the week however we will likely come to meet it at 8,100 to 8,150. Consolidation would also help normalise some of our shorter-term indicators like the stochastic, which remain in the overbought area, and the Bollinger bands.
At 2:30pm today (AEST) the RBA is likely to announce that they are keeping rates on hold. What will be interesting is to see whether they say anything of substance about monetary policy going forward. Since the U.S pivoted in language at roughly the start of the year, our RBA has been reluctant to signal a similar message. In fact for a while they had threatened moving back into a tightening cycle if we didn’t see key macro-economic data cool. For the most part though, their messaging has been empty of any real direction, with an emphasis on a “wait and see” policy.
US Markets
US shares saw modest gains overnight, with prices trading back and forth but seeing little overall movement. There was little in the way of economic news or events, though a report showed the US manufacturing contracting by more than expected, while the services sector grew by more than expected. There won’t be a whole lot of economic events until Thursday night, when we will see US GDP data. This reading is a revision of second quarter GDP, so its uncertain over how relevant it will be. Finally, on Friday US PCE price data will be released, and that will be the most important report of the week. Any sign of inflation remerging here is likely to be met with selling, given how aggressively the Federal Reserve has started the cutting process.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Energy and Discretionary stocks the best performers. Most other sectors were fairly flat.
Technically, the SP500 recently broke above the previous all-time high resistance at 5,675 and looks to be on a short-term uptrend line. On Friday, it fell back to test 5,675 as support. Should it close below that level, it would indicate further selling. Should it keep rising tonight, its hard to say where it may head to but for the past three sessions the market has struggled to push through the 5,730 level.
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