The XJO is expected to open lower this morning, just below 8,850 at time of writing. The U.S was closed overnight.
During our session yesterday, U.S futures sold down heavily. Coupled with overheated short-term metrics, their red futures led our market lower through most of our session. However, in the late afternoon we managed to regain some of the day’s losses as we bounced off the lows of the previous session at roughly 8,850. This level could be now a tentative support that we will retest this morning.
The XJO is expected to open lower this morning near 8,775 at time of writing. This follows a strong selldown in the U.S overnight. Their futures have moved slightly in the green however which at least indicates the selldown isn’t causing further selling.
The U.S opened lower, and then continued lower through their session, likely in response to Trump’s tariffs on western European allies. Even the U.S dollar fell, indicating that money is simply leaving the U.S for less strange shores. It seems reasonable to suggest that Trump is lacking support both domestically and internationally, and that though he has been largely allowed to do what he wants, he cannot molest the money.
We of course are likely to continue following the U.S. Our expected open this morning has us breaking key support at roughly 8,800, with the next key level likely being 8,750. We have already spent the last couple of sessions selling, so our response may be somewhat muted, especially when considering that they have recently made fresh all-time highs and our market comparatively has not. It seems reasonable to suggest that we test 8,750 this morning, and provided U.S futures don’t point to further blood tonight, should hold it today. Otherwise, 8,700 is the next key level of support.
With money leaving the U.S, Australia may see some overseas capital return to our market. It has happened before in recent history, and usually when Trump is ramping up tariffs. This could translate to our market holding up relatively well, or even rallying in the face of adversity, though the latter seems less likely at this stage. For now, we should continue to assume that we will track the U.S for the most part, but perhaps with less aggression.
Tonight, Trump will speak at the Davos economic forum… who knows what he will say, but investors seem prepared for continued sabre rattling and self-glorification. He may take his foot off the gas though, and give markets some respite, as he often measures his success on market performance, and the selldown last night will no doubt have him upset. On the other hand, even though we are all becoming desensitised to it all, it seems fair to say that his acts of aggression have certainly escalated during his reign. He could double down tonight, having been vindicated with his recent invasion of Venezuela.
US Markets
The U.S closed firmly lower overnight, pricing in their previous session’s futures on open and continuing to selldown throughout their session. It seems Trump is allowed to do whatever he wants, except molest the money.
Overnight’s move was a de-risking of U.S assets by investors, evident in both the selldown across major sector groups, and the fall in the U.S dollar. Typically, when the U.S has a swift and aggressive selldown, the greenback rallies as it is often seen as a safe haven. However, U.S dollar hegemony has been slowly undermined overtime. And now, with Europe threatening their own tariffs, cutting trade deals, not even the U.S dollar was able to hold up.
All sector groups bar consumer staples (which was practically flat) finished in the red last night. Tech and Consumer Disc. fell almost three per cent, and Real Estate, Industrials, Com. Services, and Financials all fell around two per cent. Only Energy, and Health Care managed to escape the worst of it closing only marginally lower.
Technically, the U.S selldown last night had them break several key levels and undo about a month’s worth of work. They broke their uptrend line, previous all-time high resistance levels (now support) and the recent lows at roughly 6,850. They also move below the 50 day MA, with the next clear target roughly 6,730. We will need to wait for the dust to settle, but there are plenty of supports around here created over the past few months, so we should expect the selling to pause soon. Their futures are slightly in the red which at least indicates their market isn’t at panic selling yet.
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