The XJO is expected rally on open this morning near 8,900 at time of writing. This follows another strong U.S session on Friday night. Their market has recovered from the one-day selldown from the now rescinded tariffs Trump had threated western European allies with last week. They are now within arms reach of testing all-time high resistance again.
Like the U.S, our market has also had a swift recovery, although our movements have been far less manic in both the selling and buying. We are simply far more subdued in our daily movements than what we see from the U.S.
8,900 is our next clear level of resistance, which we will flirt with on open this morning. It seems likely that we hold it for now, for a couple of reasons. Firstly, we are likely to wait and see whether the U.S will break their own key resistance and make fresh highs, or stall and pullback once again. Secondly, we have local CPI data on Wednesday, and a Fed meeting on Wednesday night. It seems likely that both our market and the U.S pause at key levels and wait for future guidance on monetary policy before making new highs.
Our employment data last week came in stronger than expected. We remain practically at full employment. It seems likely that our expansionary monetary policy cycle has come to an end, and the threat of us returning to a contractionary cycle this year grows ever present. This should be bearish for our market in the medium term. Of course, in the short-term we seem curiously willing to price in U.S gains. There seems to be plenty of liquidity out there, and locally, full employment means an economy that is putting super and cashflow into our indexes, so for now things seem stable enough.
If we do manage to crack through 8,900, then the next clear target is 9,000, with interim resistance expected at 8,950. The underlying uptrend line, which we bounced from last week, comes in at roughly 8,800, which is also a key level of support. If we fail at 8,900, we should expect our market to consolidate in this range provided the selling isn’t dramatic.
8,900 resistance and the uptrend line form an ascending triangle. Typically, these triangles break in the direction of their underlying trend. There is no reason to believe that this won’t be the case this time around either. Although, it does feel like we are rallying on a deluded collective agreement of warped reality.
Aside from the CPI and Fed meeting, there is not much else on except U.S company reporting. There is some local and U.S PPI data, and consumer confidence numbers but that’s about it.
US Markets
US shares were mixed on Friday and higher overnight. Prices have been rising ahead of mega-cap earnings reports and a Federal Reserve update on interest rate policy later this week.
Apple, Meta, Microsoft and Tesla are slated to report quarterly results later this week, and investors will use these reports to guage the effectiveness of AI spending. The are concerns over high valuations in tech, so even small misses could trigger a massive revaluation of the AI trade. We will also get an update from the FED on Wednesday night, though no rate cut is expected. Instead investors will look for clues as to when the next rate move will come.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Communications, Technology, and Utilities the best performers. Discretionary stocks saw the most selling.
Technically, with the recent strength the SP500 has pushed back towards the all-time high resistance, though it remains slightly below this level (roughly 6,990). The index looks likely to rise to that resistance in the coming sessions, but we will need to wait to see if the market can break above 7,000 points before further gains will look likely. Should the index hold this level as resistance, that could be a sign we will see a move to the 6,750 support level.
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