The XJO is expected to edge higher this morning, following a tumultuous night of trading in the U.S which, against all odds, saw their market finish practically flat. Their futures are currently firmly in the green.
Not much has changed in the past 24 hours. The news still spells doom and gloom. However, it seems at these levels a good measure of bargain chasers are getting into these sold off markets.
Our market remains surprisingly courageous in the face of U.S selling. We managed to hold up surprisingly well yesterday, despite U.S futures heralding another bloody night. The SP500 has fallen roughly 18% from their highs, or roughly 11% since the selling was renewed last week. Our market has only fallen roughly 14% from our highs, or about 7.5% since the selling renewed last week. This morning, we are expected to even rally on open, and with U.S futures in the green, we could even extend the recovery through the session.
Our courage could perhaps be attributed to a couple of reasons. Firstly, Australia didn’t get hit with tariffs that hard. Though we like to follow the U.S, we are certainly in a better position compared to them, who are at the epicentre of the trade war. Secondly, news outlets are reporting that the market expects up to five rate cuts this year from the RBA. This is simply balderdash, but it does provide some hope amidst the chaos.
Our expected open this morning will bring our market back into the Bollinger bands, bringing our market back into an acceptable volatility range. Our stochastic have just made it into the oversold area. Yesterday, we settled on 7,350 key support, which is a key historic level from back in January 2024. We should expect it to hold today. We also rebounded intraday from roughly 7,175, which we can also now consider support, though it seems likely to be simply somewhere between 7,150 and 7,200. 7,550 to 7,600 is the next key level of resistance. It hasn’t been tested since this time last year, but remains the most logical target if we see any serious buying.
Looking forward, it is hard to have any real conviction in this market. We could see it renew selling tomorrow and shed another five percent. We could see a strong “V” shaped recovery. But all things considered, unless Trump reverses the tariffs, or by the very least, his rhetoric, it would be hard to suggest we have seen the bottom. In the short-term however, keep in mind, the U.S has already sold off almost 20% since their highs. It seems reasonable to suggest that in the short-term their market could find a base around here. With bargain chasers clearly entering markets, some mean reversion and relief rally seem on the books.
US Markets
US markets finished a little lower after a wild back-and-forth session overnight, that saw prices firmly in the red, before moving firmly into the green after a fake tweet was circulated suggesting Trump would pause the tariffs for 90 days. That tweet was debunked and the market pulled back into the red, but at the close it was well off the lows of the session. US futures now sit pretty strongly in the green. Not a whole lot of rhyme or reason can be ascribed to what happened, but perhaps markets were enthused by Trump saying he was open to negotiations on tariffs. However, he also threatened to add another 50 percent to tariffs on China. All of this should be negative for markets, but after falling so strongly for several sessions, perhaps shorts were closed and bottom-feeders came in overnight.
Two of the eleven sector groups of the SP500 closed higher overnight, with only Communications stocks seeing notable buying. Real Estate, Materials, Energy, and Utilities stocks all fared poorly.
Technically, the SP500 looks extremely bearish – it may have found support around 5,000 overnight, should that level break, we could expect further selling. Any rebound is unlikely to rise beyond 5,500 any time soon.
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