The XJO is expected to rally on open this morning, near 8,785 at time of writing. This follows a strong rebound in the U.S Friday night which saw their market bounce from key support at roughly 6,800, and finish back within their recent consolidation range. Their futures are flat this morning.
On Friday we overshot to the downside, experiencing our largest one day fall since Trump’s “Liberation Day” last year. We smashed through both 8,800 and 8,750 key supports, and landed on 8,700 key support. We even had a small intraday bounce from it.
The break lower also confirms the head and shoulders pattern that we have been forming since roughly mid-January. The rebound this morning could be the typical retest of the neckline. However, with the recent volatility both locally and overseas, and with key earnings reports this week, it is hard to put much faith in the reversal pattern.
What is clear, is that we are no longer trading in a short-term uptrend. We have failed to make higher peaks and troughs recently. Instead, we have done the opposite, forming a recent lower peak, and with this morning’s reversal, a lower tough.
It wasn’t surprising to see our market finally sell down on Friday. Our market had been unusually resilient following a rise in interest rates, especially with the prospect of more on the table. However, we clearly continue to be tied to U.S movements. If they continue hold strength, our market should do so too – albeit with less strength and more reluctance. It feels like we may be happy to price in the gains, but we are more than happy to selldown.
Finally, it will be interesting to see how the market justifies the bloated valuations of our market this reporting season. This week we have big names like CSL, JHX, and CBA. CAR, S32, NST, PME, ASX, CPU, and ORG are others we can trade reporting strategies on. CBA’s report could easily drive our index on Wednesday. The Banks often move together to varying degrees, and represent the largest companies in our largest sector. Indeed, CBA is the largest stock on our market (by market cap). The other three banks come in 4th, 5th, and 6th.
For macro-economic reporting this week, the U.S has retail sales numbers tomorrow night, followed by employment figures Wednesday night. This data was delayed from last week (another gov. shutdown). Finally, on Friday night, the U.S has CPI. Though we of course won’t react to that until next Monday.
US Markets
US shares saw a monumental rebound on Friday night, with one of their biggest one-day gains in a long time. Beaten-down technology stocks led the recovery on Friday, driven by an 8 percent surge in chipmaker Nvidia. The S&P 500 and Nasdaq both jumped about 2 percent, while the Dow Jones hit a record. There will be plenty of US economic data this week including retail sales and unemployment on Tuesday and Wednesday, given the huge move on Friday, we might now expect some sideways movement and for the market to then take a lead from that data.
Nine of the eleven sector groups of the SP500 closed higher on Friday, with Technology, Industrials, Energy, and Financials the best performers. Only communications saw notable selling.
Technically, the SP500 held the support level at 6,800 and bounced on Friday, showing a bullish signal and breaking above the 50-day moving average. This technically suggests a move back to the all-time high resistance at 7,000. Its worth noting that the recent trough was no higher than the previous, which could indicate more of a sideways movement going forward, though we will have to wait and see.
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