The XJO is expected to rally on open this morning, near 8,835 at time of writing. This follows a strong rebound in the U.S overnight which saw their market retake roughly half of their previous session’s losses. Their futures are flat.
Trump, likely having had seen the market tank the night before, backed down from the economic ledge. It is becoming clear that Trump is allowed to do whatever he wants to whomever he wants both domestically and internationally, provided he doesn’t molest the money. Another TACO trade.
The U.S rebounded from key resistance intraday overnight, giving up a chunk of their intraday gains. Even though Trump may have bent the knee to his masters (capital markets), it is early days and Trump is becoming more erratic the longer his presidency drags on. Markets are likely to remain cautious in the short-term.
Our market’s response yesterday was fairly mute despite the strong selling from the U.S the previous session. And our response this morning will keep in step. We returned to the underlying uptrend and bounced from it on open. This morning we are set to continue the move higher, reinforcing the idea that we are continuing the underlying trend. With our expected open above 8,800, now 8,850 to 8,900 is the next key level of resistance and logical target.
We are not out of the woods. Markets are likely feeling delicate and with a bit of shellshock. Now that the U.S has blinked, selling might come easier on the back of poor news. However, considering we are generally lagging behind the U.S already, and that if things get worse in the U.S capital could flow into our market once again, we should continue to run our own race to some degree with a continued muted responses to their whipsaw movements.
Today we have employment figures which are expected to worsen from November to December. Our market has little to look forward to in respect to monetary policy, and there are whispers from the dark corners of our market that the RBA could even return to a contractionary policy soon. Unemployment is a key metric that our market will want to see worsen to both increase the likelihood of a cut, or by the very least, decrease the likelihood of a raise.
US Markets
US markets rebounded overnight after Trump announced in his speech at Davos that the US wouldn’t use military force to take Greenland. He also walked back the idea of tariffs on European nations that opposed his Greenland plans. Markets applauded this.
US markets have been somewhat volatile recently, with prices pulling back from all-time highs due to Trump’s tariff threats and other unsable behaviour. However, the main thing to keep in mind is that the US government money printing is continuing (and in fact accelerating) and that this money is consistently flowing to financial markets. We are in a period of US asset inflation and that will likely continue until the money printing stops, or possibly until interest rates rise.
All eleven sector groups of the SP500 closed higher overnight, with Energy, Materials, Healthcare, and Industrials the best performers. Most sectors saw strong buying, with only moderate buying in Staples and Utilities stocks.
Technically, with the recent U.S selldown the index has now moved into a bit of no-mans land. They broke their uptrend line on the recent selling. However, they have bounced well above the next clear target roughly 6,750. Its too early to say is this will be a new trough and the index will move back to the all-time high resistance at roughly 6,990, or whether we will see selling back to the 6,750 level.
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