The XJO is expected to open lower this morning following a strong night of selling in the U.S which saw their market reverse all of Friday’s relief rally. Their futures have moved decidedly into the green, however.
We are whipsawing like the U.S, beholden to their extravagant moves. Yesterday we also had a nice rebound, reversing our previous session’s losses, closing firmly in the green. We settled on 8,250 key resistance, and this morning it looks like we will rebound from it. Our expected open is just shy of 8,200, but considering what we saw last night, we should expect to reverse most if not all of yesterday’s gains. We could see 8,150 again, but if U.S futures remain firmly in the green today, we may feel comfortable mitigating the damage.
As stated recently, it seems reasonable to suggest that for the next while, our market is likely to remain somewhat rangebound at the lows here. The 200 day MA remains a keen target, which comes in just above 8,100. We practically reached it on Friday, but it wouldn’t be surprising to see our market revisit it, and even overshoot it to hit our historic lows at 8,050. Unease has settled in, sentiment has turned, and there doesn’t seem much to be positive about.
We should also see some mean reversion and relief rallies, but we shouldn’t expect them to lead to a shift in sentiment and move back to our all-time highs (though stranger things have occurred). Our 50 day MA, which comes in at roughly 8,350 is the next key target if markets feel invigorated once more, but the most recent levels of resistance that have played out are closer to 8,250 and 8,300 for now.
The Financials and Materials were both down overnight, with the Materials faring the worst at -2.09%. We should see this flow directly into our own miners and banks. They look set to return to their key supports.
Today we have local Retails Sales numbers and the minutes from the last RBA meeting. Both could have an affect on our market, but are overall likely to just get lost in the sauce.
US Markets
US shares fell strongly overnight, wiping out all of Friday’s gains and a little bit more. Shares fell late in the overnight session after initially opening higher, which is due to Trump confirming he would implement 25 per cent tariffs on exports from both Mexico and Canada on Tuesday, with “no room left” for negotiations. He also confirmed a second 10 per cent tariff increase on exports from China. Selling has hit US markets, which has been driven by President Trump’s policies. While the conditions are still ripe for price gains (the US government is printing money at the fastest rate ever and will only get faster under Trump), investors are increasingly worried that economic activity will collapse regardless. Still, in the absence of negative news, we ahve to continue to assume US markets will rebound.
Four of the eleven sector groups of the SP500 closed higher overnight, with Real Estate the best performer. Technology, Energy, Discretionary, and Materials saw the most selling.
Technically, the SP500 fell back to the support around 5,850 index points. There is an additional level of support around 5,800, and the index will need to close below 5,800 for further selling to look likely. Should the index hold above these lows, it could indicate a move back towards 6,000. We are still waiting for a clear signal at the current support levels.
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