The XJO is expected to open around 40 points higher today, back towards the highs of Wednesday at roughly 8,960 index points.
The jump in our market today is likely to be led by the materials space, with metals prices and particularly precious metals prices which are skyrocketting as the US dollar tumbles. Investors are losing condifence in the US dollar due to continued and increasing US government borrowing, and due to selling of US government debt by Europe and China.
What does that mean for the Australian market? Our materials stocks are likely to fare well, and we might see general buying from overseas investors looking to get out of USD denominated assets and into something perhaps a bit more stable. Keep in mind though that a local RBA rate rise is a real possibility next Tuesday, which could be a dampener next week.
US Markets
US shares were mostly lower on average overnight, with a big drop in Microsoft triggering the lower move. Prices fell very strongly initially but they pulled back towards their opening levels later in the session. Also worrying investors has been a rapid drop in the US dollar, which has fallen due to ludicrous levels of US government borrowing and European and Chinese selling of US government debt.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Communications the best performer after Facebook’s report, followed by Real Estate and Financials stocks. Technology stocks saw the most selling after a big drop in Microsoft following its report.
Technically, the SP500 fell off overnight but bounced intra-day from the 50-day moving average and potential short-term uptrend line. This leaves the index inside and ascending triangle pattern between that short-term uptrend line and below the all-time high resistance at roughly 7,000 index points. We would need to break either the short-term uptrend or the all-time high resistance before another directional move will look likely.