The XJO is expected to open flat this morning following a small rally in the U.S overnight. Their futures are flat.
Yesterday we managed to retake minor intraday losses to finish marginally in the green – likely helped by positive U.S futures. We continue to consolidate at the convergence of the 200 and 100 day MAs – a point of safety for our market as we wait and see how things unfold. Today is expected to be no different.
We continue to skirt along 8,150 support, where the MAs are for the moment. Roughly 8,200 to 8,250 is the top of the consolidation.
It is hard to know what will shake markets and awaken them from their short kip. It would have been reasonable to suggest that the Fed’s caution about stagflation the other night during their rate announcement would cause some kind of emotion. But alas, no.
Next Wednesday CBA will give a quarterly update. It would be hard to expect them to justify their valuations, but right now they are seen as a relative haven with everything going on. Perhaps we will continue to see some turbulence in our market leader and the rest of the banks.
Otherwise, we simply must wait and see how things unfold.
US Markets
US shares managed a gain overnight after the framework for a trade deal was announced between the US and UK. Shares pulled back from the intra-day high when it became clear this probably wasn’t a major event. While no deal has been signed as of yet, it does show to the market that Trump is looking for exits from his trade war. The UK charged practically no tariffs on US imports so it looks like instead they will lower food standards to allow the import of some US beef and Chicken – something I would be very displeased about if I were living in the UK. Regardless, Despite the trade war, US shares have shaken off a lot of negative news (including a FED warning last night on stagflation) and they are continuing to grind higher. However, they may start finding some resistance soon around the peaks of late March. Additionally, the longer the current tariff settings remain in place, the more likely we are to see bad company reporting and declining economic data – something which could force prices lower. The US and China will start trade negotiations over the weekend, but don’t expect any agreements in the short-term.
Seven of the eleven sector groups of the SP500 rose overnight, with Discretionary, Industrials, and Energy the best performers. Healthcare and Utilities saw the most selling.
Technically, the SP500 has now broken the downtrend line that has formed since February. This should indicate a move back to the peak of late March around 5,775 – 5,800, which is also where the 200-day moving average sits. However, should the index break below 5,500 without 5,775 being reached, that would be a very bearish sign.
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