The XJO is expected to rise on open this morning, with futures pointing to an open around 8,500 index points.
US markets gained overnight and then after they closed, the world’s most important listed company, NVIDIA, announced better than expected results, which sent global futures markets higher. Currently NVIDIA’s share price is five percent higher in aftermarket trading after better than expected revenues and a lift in futures guidance.
The Australian market has been falling rapidly and does look oversold in the short-term from a technical perspective. However, it is worth acknowledging that the market is still substantially overpriced from a fundamental perspective. The recent selling has been driven by the banks, which remain overpriced relative to global peers and their own historical valuations.
Still, we would expect a rebound for Australian shares here, especially considering that we have fallen about twice as hard from our recent peaks as have US markets.
Technically, the XJO does look like its finding some support around 8,450 after holding that level on Tuesday and Thursday. We should bounce today but we would need to close above the 200-day moving average at 8,508 for further gains to look likely. Should we close above that level, we could see a rebound back to the previous support at 8,630, which may now act as resistance. Should we resume selling and break below 8,450, we are likely to continue lower to a technical correction level (10% fall from the peak) around 8,250.
US Markets
US shares rebounded overnight as investors repositioned ahead of Nvidia’s extremely important quarterly results, as well as crucial employment data that had been unavailable due to the U.S. government shutdown. The recently ended government shutdown resulted in a backlog of official economic data, which will now be released including the September employment report, which is to be released tonight. After US markets closed, NVIDIA, announced better than expected results, which sent global futures markets higher. Currently NVIDIA’s share price is five percent higher in aftermarket trading after better than expected revenues and a lift in futures guidance. We could see this drive a bit of a rebound for US shares from here, though only as long as tonight’s jobs data isn’t too strong to prevent further rate cuts, nor too weak to suggest a recession.
Six of the eleven sector groups of the SP500 closed higher overnight, with Technology, Communications, and Materials the best performers. Energy and Utilities stocks saw the most selling.
Technically, the SP500 broke several key levels earlier this week, including breaking below its uptrend line, below its support level, and below the 50-day moving average. That was a bearish signal, potentially suggesting we will see further selling to perhaps the major 6,550 support level. However, so far the index has held above 6,550 and with the recent positive news, could generate a bounce. We would need to see a break back above 6,750 for another run at the all-time high to look likely.
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