The XJO is expected to rally on open this morning following a strong rebound in the U.S overnight. U.S futures are also mildly in the green.
Yesterday we opened practically on key support at roughly 8,650. This level is reinforced by the fact it was our previous all-time high resistance. Coupled with our new all-time high resistance at roughly 8,750, it makes up the recent consolidation range. It was not too surprising then, to see our market bounce off that key support and pushed higher through the session to maintain the range. We reversed all the intraday losses to finish flat.
We were likely cynical of the U.S selldown, expecting the buy-the-dip mentality to remain firm. Our cool head prevailed and the U.S did indeed rally back up overnight. In response, we should open just below 8,750 key resistance, retesting the top of the consolidation range on open.
Despite our optimism, it would be hard to expect our market to push through today, especially with the U.S still on the rocks. The whipsaw movement is likely to keep traders on edge.
Locally, we much to be positive about. Inflation is pulling back at a steady pace which entrenches the belief of further rate cuts this year. The market is expecting at least a couple of cuts before the year is out, though some are optimistic for more.
Provided the U.S doesn’t correct, our market should maintain its sidewards to bullish movement. We can only assume that we will eventually break higher, though when is hard to suggest. The spanner is in the works may be our reporting season over the next few weeks, where stretched valuations will need to be justified.
US Markets
US shares jumped strongly overnight, with prices recovering after Friday’s selling following the jobs report. US shares fell strongly on Friday after fewer jobs were created than expected in July, and with June and May’s numbers being revised substantially lower. The numbers showed that US unemployment actually rose for three straight months. Overnight investors took the view that this would mean the FED would cut rates at the next Fed meeting in September. This expectation of rate cuts has caused a strong jump, and it could cause further gains as well.
Ten of the eleven sector groups of the SP500 closed higher overnight, with only Energy stocks closing lower. Communications, Technology, Utilities, and Materials stocks saw the most buying.
Technically, the SP500 held the potential support at 6,220 and has now bounced off this level. Given the strong bullish bar overnight, we could now see the index rise from here, there is resistance at 6,300. The index remains on an uptrend, with higher peaks and troughs (though the uptrend line has broken). A break below 6,220 would see a lower trough however, and would call the uptrend into question.
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