The XJO is expected to open higher this morning following a continued move higher in the U.S overnight. Their futures are flat this morning.
Today it looks like we are committed to pricing in the gains from the U.S. Yesterday, we were cynical that they could indeed continue their move higher. We even were down at one point during our session yesterday, but managed to finish marginally in the green. This morning, we should open near 7,300, breaking through 7,250 key resistance.
Roughly 8,350 is the next key level or resistance and represents the all-time highs for our market. Don’t be surprised if we get there for as long as this sugar rush lasts in the U.S. However, both our market and in particular the U.S are moving quickly into overbought territory by short-term metrics, and some swift profit taking should be around the corner.
Our market is quite clearly following the U.S and largely refusing to acknowledge its own situation. The banks this week have reported, and done so quite poorly. NAB reported yesterday, with results coming in worse than expected. Their cash earnings were down just over 8% compared to last year – a similar result we have seen from ANZ this morning. Both also saw rising overdue loans, and lower cash interest margins. Regardless, NAB is trading near all-time highs, rallying yesterday despite their news, and both are expected to continue the rally today.
US Markets
US shares mostly continued higher overnight, with the Federal Reserve cutting interest rates by 0.25%, which was expected. Shares also continued higher with the optimism of Trump’s election, with investors happy to buy on the expectations of lower corporate taxes. The Fed statements after the rate cut were perhaps more dovish than expected, with Fed Chair Powell stating that recent gains in bond yields have reflected growth expectations, rather than a view that inflation will start to rebound. While the Fed might now hold off further rate cuts at their December meeting, they seem confident that rate cuts will continue in 2025. Overall things continue to look bullish and the bubble looks like it will be pumped up further from here – not least because of the amount of money the US government is creating to pump into the economy. But make no mistake, prices are in bubble territory, with mathematical measures of share prices matching or exceeding previous bubbles of history. It is worth noting that some of those bubbles did take years to pop however.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Communications, Technology, and Discretionary stocks faring the best. Financials saw the most selling after their strong gains from the prior session.
Overnight the SP500 again closed at a fresh all-time high. It broke through the previous peak at 5,870 after Trump’s election and is continuing higher. Its hard to say what will happen from here, as things are mostly moving on fundamentals, but things technically look further bullish.
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