The XJO is expected to jump around 50 points on open this morning, which should see us open right around the resistance between 8,880 and 8,900.
Our gains are set to come from positive US leads, with US markets rising strongly due to a deal to end their government shutdown. The gains were led by mega-cap tech stocks, with money flowing back into the space after recent profit taking due to concerns around high valuations.
The XJO index recently fell back to the support level around 8,750 yesterday showed a bullish bounce from this level that pushed us beyond the short-term downtrend line. This means we are breaking out of a descending triangle which should see us rise to the next potential resistance between 8,880 and 8,900. Should we break above 8,900, we could see a move to the next major mark of 9,000 index points.
Australia is also seeing some bank reporting at the moment, which have been very poor relative to share prices. However, the banks haven’t really moved after the reports. This shows us that we are currently in an index led market, rather than a stock led market – meaning that trends, supports, and resistances on the XJO are very relevant at the moment.
CBA was the final major bank to report, with their quarterly report today. The report looks better than the other banks, but the share valuation is substanitally higher than the other banks, so its hard to know what the share price will do today.
US Markets
US shares jumped strongly overnight on news that the government shutdown is set to end. It looks like the democrats have caved to republican demands. The shutdown is the longest in history and has left both the Federal Reserve and traders in the dark without official economic readings.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Tech, Communciations, and other growth related stocks the best performers. No sector saw notable selling.
Technically, the SP500 has bounced from its longer-term uptrend line, which is also the lower bound of the channel. The index has been on an uptrend and potentially an acsending channel but has worked its way back to the bottom of the channel. The index also closed beyond a potential resistance at 6,750, which would indicate a rise back to the all-time high resistance of 6,900, or beyond. The stochastic is also turning to point higher from the oversold range, which also confirms a likelihood of upwards movement.
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