The XJO is expected to open lower this morning. The U.S was slightly higher overnight, but we ran our own race yesterday, rallying despite strong falls in the U.S the previous night. U.S futures are flat.
We opened marginally lower yesterday, showing a willingness to hold key resistance at roughly 8,300. However, some CPI data came out at 11:30. It was mixed but showed that core weighted CPI had declined more than expected. This was enough to push our market through resistance and move straight to the next resistance at 8,350. We even stuck our head above it, only pulling back to sit on it in the last 20 minutes or so of trading.
The reading was received well, as it puts some hope back into the market’s heart of us finally getting a rate cut “soon”. There has been mounting political pressure for the RBA to cut rates alongside much of the developed world. The RBA has dug its heals in so far, but perhaps with yesterday’s readings they may become more dovish. Some are speculating an RBA cut in February, but that seems pretty ambitious. One reading is not enough. At this stage, especially if inflation picks back up again in the U.S, don’t be surprised to see no cuts before mid-year.
Our expected open is roughly 8,320. We should use 8,300 as support now. This is also roughly where the 50 day MA comes in, and with the U.S tracking sidewards in a pennant, it would make sense for our market to settle there. Our stochastic are in the overbought area, so a pullback to these levels would also help normalise them. The same can be said for our Bollinger bands.
Yesterday’s move also confirmed a higher peak, which helps confirm the short-term uptrend that has been forming since our lows in late December.
Local retail sales numbers are due today. They are expected to grow from 0.6% to 1% in November. Even though this could be interpreted as inflationary, it is still a low enough number that it shouldn’t undo the sentiment of yesterday’s CPI reading.
US Markets
The SP500 closed marginally in the green overnight. Earlier in their session they sold down and retested key support at roughly 5,870. This is a level that roughly represents their recent lows, and their previous all-time high resistance before the election. It is quite clear they do not want to break it at this stage, having tested it three or four times over the past few weeks. They once again rebounded from it last night intraday, to retake the session’s losses and finish slightly in the green.
Also coming in at similar levels is the broader uptrend line, which has been reinforcing that support level. There is also a countertrend line that has been in play since the highs in early December. Their index rebounded off that a couple of days ago, pulling back largely on tech, following a stronger than expect PMI read. With today’s bounce, it is clear they remain trading in a pennant pattern.
Tech was flat last night, stemming the bleeding from the previous session. Consumer Disc. continued their descent however, falling .75%. Most other sectors were flat to marginally higher, with Health Care and Materials faring the best with about .50% gains.
Overall, the U.S continues to track sideward, trading to the point of the pennant and at the means of their short-term indicators. They will break eventually, but it is hard to know which way with fears of inflation returning to the news cycle.
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