The XJO is expected to open flat this morning.
The U.S on Friday night marginally rose, but held key resistance. Our market is reluctant to make fresh highs without the U.S indicating it will do so as well, though it is clear we are eager. During our Friday session, our index got ahead of itself with a strong intraday rally which was largely retraced into the close. This puts both the XJO and SP500 practically trading at all-time high resistance levels.
Our muted open is likely us simply waiting to see whether to the U.S can crack through. Their futures are flat this morning, so we have little indication as to whether their recent momentum will carry them through, or if it is time for some profit taking. It also wouldn’t be surprising to see continued sidewards consolidation.
Key resistance remains 8,100, though 8,150 is also a level we have bounced intraday from twice now. We are set to flirt with them once again this morning. 7,950 remains key support and roughly where the 50 day MA comes in. Short-term stochastic and RSI put the market at equilibrium, giving little indication. Ultimately, the market seems to be trading in a broad ascending triangle, with 8,100 roughly the key resistance and the uptrend line coming in at roughly 7,700. We would typically expect the uptrend line to prevail and for resistance to break, and with the bullish undercurrents we should assume this is the most likely scenario (despite how irrational the broader market feels).
Markets remain sensitive to macro data – particularly in the U.S. They are all but guaranteed to get a rate cut this week. However, their market is now starting to react poorly to cooling macro-economic metrics as it indicates a recession. Our market seems to practically shake off anything local despite our situation being quite different to the U.S. Our inflation seems to remain steady alongside full employment, but our GDP and retail spending has stagnated. Our RBA is sitting on its hands, unsure what to do.
In the week ahead: tomorrow night the U.S has retail sales numbers. The Fed is expected to cut rates by 25 basis points on Wednesday night. This is already priced in, so the market will be looking at Powell’s future guidance. On Thursday we have local employment data. We are still expected to remain at full employment.
US Markets
US shares enjoyed a fifth consecutive day of gains on Friday, with each of the three major indices seeing broad-based buying. There was little in the way of major news or events and instead prices continued higher with the recent upwards momentum. Prices are rising ahead of the expected Federal Reserve rate cut this week, with a 0.25% cut the likely move, though some have been calling for a 0.5% cut. That Fed decision will occur on Wednesday night, but there will be other major events this week as well including Tuesday’s Retail Sales numbers. Prices are very elevated up here in expectation of the rate cut, but this could prove a case of being careful what you wish for, as every cutting cycle this millenia has been met with market sell-offs. Whether that is the case this time around will be down to whether the US economy can avoid recession.
All eleven sector groups of the SP500 closed higher on Friday, though most saw modest gains. Utilities and Communications saw the most buying, while Financials and Healthcare saw the least.
Want to continue reading?
This is only an excerpt from todays TradersCircle Members Morning Market Update. Become a member today for this plus full length mid-day and end of day updates, trade recommendations, trade group webcasts, and much more!