The XJO is expected to open higher following a strong rally in the U.S on Friday. Their market broke through the downtrend line but stalled at their previous peak and key resistance. Their futures are flat.
On Thursday last week we had a strong rally back to the 8,350 key resistance. On Friday we rebounded from it, following a similar move in the U.S. This morning we are set to test it once again on open. However, despite the strength in the U.S on Friday, we shouldn’t expect too much more from our market today for several reasons. Firstly, much of the gains in the U.S happened on open. They finished as a doji, after clearly stalling at resistance. Secondly, they finished near their 50 day MA, which our market is already trading near. Thirdly, most of their move was driven by Tech and Consumer Disc which aren’t well represented in our index. Finally, their futures are flat this morning and their market is closed tonight, so we are unlikely to want to make too much headway without further leads.
From here, it is hard to say. The market is technically trading in a sidewards pattern with spikes of volatility, and whipsaw or yoyo-like movement. However, we are largely beholden to how the U.S trades, and there are a lot of question marks surrounding them.
Trump’s inauguration is tonight. He is a divisive president to say the least, and it is hard to know what rhetoric he will follow through with, what he can or can’t achieve, or how soon he will act on what. Their markets are also digesting the future of monetary policy and the health of the economy, and how all three will work together.
There is very little else in the way of key macro reporting from either Australia or the U.S this week, so much of the movement is likely to be on the back of any rhetoric from the change in government.
US Markets
The U.S rallied on Friday heading into the weekend prior to Trump’s inauguration. All sectors rallied except Real Estate and Utilities which were flat, and Health Care which sold off marginally. Consumer Disc. and Tech had the strongest growth (over 1.5%) as fears surrounding an interest rate pause have been partially quelled with some weaker than expected data last week.
The SP500 managed to break through their downtrend line that has been in play since roughly mid-December. They managed most of their gains on open, tested their previous peak at roughly 6,020 and then pulled back to finish as a doji.
On Thursday, the SP500 looked like it was holding the downtrend line, and with their small pullback, a continuation of it. However their break through on Friday, and the move to the previous peak means by the very least that the downtrend is shallowing out. Of course, it could also mean that they are transitioning to a sidewards channel, or changing trend, but we will need to see how things develop to get a clearer picture.
Broadley, the U.S is in a state of flux. There is a change of government happening this week, but their still remains large question marks surrounding both the health of the economy and the future of monetary policy – with both traditionally operating in juxtaposition. For now the U.S is trading near the comfort of the 50 day MA, as investors wait for further guidance in each of these key areas.
In the week ahead, aside from the inauguration tonight, it is a public holiday for their market for Martin Luther King Jnr Day. But aside from that there is little else.
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