The U.S gave up their intraday gains overnight to finish flat, which at least indicates they were unwilling to commit to the break higher. Our market is taking this rather well, with only a small pull back expected on open this morning. U.S futures are also flat.
Our market closed in fresh all-time highs again yesterday but only marginally, giving up once again almost half of the intraday gains. It seems like our market wants to push higher but can’t truly commit without the U.S breaking higher too. Its quite extraordinary watching our market make ground despite all reason. This may be the most expensive market in our life-time.
The shake up will come in the early hours of tomorrow morning with the U.S interest rate decision. Their market will have time to react, and their futures are also likely to affect our trading tomorrow if they move. The rate cute is priced in, but markets will be looking to future guidance.
US Markets
US shares were flat overnight ahead of tonight’s Federal Reserve meeting. Shares did inially trade higher, but they pulled back to close unchanged. Still, it was the SP500’s seventh consecutive higher close in sucession. The FED is expected to cut interest rates tonight – the first US rate cut since 2020. Markets have enjoyed perhaps their most bullish time in history in the lead-up to this event, so it will be interesting to see what happens afterwards. The debate now is whether the Fed starts by cutting 0.5% or goes with the 0.25% cut. Recent economic data has been weak but inflation has been somwehat sticky, so its up to the Fed as to whether they risk a rebound in inflation to try and achieve a soft landing. Overnight US Retail Sales data was broadly in-line with expectations, with Core Sales growing by slightly less than expected, while total Sales grew by slightly more than expected. US shares are extremely expensive at the current level, perhaps their most expensive in history (behind the dot com bubble), whether this rate cut allows prices to grow further, or whether this is the turning point in valuations, we will have to wait and see.
Six of the eleven sector groups of the SP500 closed higher overnight, with Energy the strongest sector, followed by Discretionary. Healthcare stocks were the biggest losers. Most other sectors were flat.
Technically, the SP500 has continued up to the all-time high resistance at roughly 5,650. We will need to see what happens at this level, whether we see a hold of resistance and a break lower, or whether we see a break through this level and further gains. Expect to see a reaction either way following tonight’s Federal Reserve meeting.
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