The XJO is expected to open higher this morning on the back of a strong rally in the U.S Friday night, which saw their market break into fresh all-time highs. Their futures have also moved strongly into the green.
We closed slightly lower on Friday after shedding opening gain and rebounding off 9,050 resistance intraday. 9,000 to 9,050 was proving to be a sticking point for our market. They were our previous all-time high resistance and were at least in part contributing to our market’s consolidation.
This morning, we should crack through 9,050. This puts us within arm’s reach of all-time high resistance at 9,100 – the next logical target. Don’t be surprised if we get there today.
CPI came in lower in the U.S on Friday night, entrenching their belief they entitled to further rate cuts. Our market also believe we will get a local rate cut will before the year is out. As long as markets see a rate cut coming soon, it seems likely they remain bullish. How long the dance can last is anyone’s guess though.
It’s a big week of macroeconomic data ahead. Tomorrow night the U.S has consumer confidence numbers. On Wednesday we have local CPI data which is expected to increase slightly across the board. On Wednesday night the U.S Fed will likely cut interest rates, and markets will of course be focused on future guidance from Powell. On Thursday night the U.S has GDP numbers which are expected to decline strongly. On Friday, we have local PPI data, and on Friday night the U.S has PCE data. How much data we will actually get from the U.S is hard to know as their government remains in shutdown. Of course, the Fed is unaffected by the shutdown and will give an update to monetary policy Wednesday night.
It seems likely to be a very tumultuous and volatile week ahead. Markets are trading at all-time highs and are due for some profit taking or even a correction. However, they could easily continue to rise if macroeconomic data comes in favouring a continued expansion of monetary policy.
Once the cut comes through for the U.S Wednesday night, the U.S will be looking for confirmation of the next hit. If Powell isn’t clear on his rhetoric, the U.S may see some profit taking. For our market, we will be pushed and pulled by our own data on one side, and how the U.S trades on the other. They could exacerbate or counterbalance each other. For example, if CPI comes in stronger than expected, our market is likely to remain stagnant at best in the face of U.S gains. If the U.S sells down however, our market likely won’t have trouble selling down with them.
US Markets
US shares rose to fresh record highs on Friday, with US inflation coming in slightly lower than expected, opening the door for a rate cut from the Federal Reserve at their meeting on Wednesday this week. While an October cut had largely been expected by the market, bets on another cut in December are now starting to rapidly increase. The current US government shutdown has meant that we haven’t seen any US economic data, but they made an exception for the inflation numbers. Sentiment may also be boosted by news over the weekend that the US and China might be close to a trade deal. Indeed, Treasury Secretary Scott Bessent also stated over the weekend that he anticipated a “fantastic meeting” between Trump and Chinese President Xi Jinping in South Korea later this week. Stating that he thinks Trump’s threatened 100 percent tariffs “will be averted.” Outside of this, Trump is increasing tariffs on Canada in response to political advertisments that have been run in the country. Regardless, things are looking further bullish for US markets, with little in the short-term that appears likely to stop the buying.
Six of the eleven sector groups of the SP500 closed higher on Friday, with Technology, Communications, Utilities, and Financials the strongest performers. Energy stocks saw the most selling, followed by Materials.
Technically, the SP500 broke through the previous all-time high resistance on Friday, which sits at roughly 6,750. The index rose to 6,800 before stalling, but overall looks further bullish. The index remains on an uptrend, and with the recent break higher we should see further gains. It is now hard to say where the buying might stall, but look for round numbers as potential sticking points. To the downside, the most recent trough aronud 6,650 is likely to act as support. The stochastic is also indicating further gains for US shares, though it is approaching the overbought area.
Want to continue reading?
This is only an excerpt from todays TradersCircle Members Morning Market Update and doesn’t include the key data and charts our traders are keeping an eye on every day. Become a member today for this plus full length mid-day and end of day updates, trade recommendations, trade group webcasts, and much more!