The XJO is expected to open lower despite a clean break into fresh all-time highs in the U.S overnight. Their futures are down, however.
Our bearish open is likely due to a few factors. Firstly, the only two sectors in the red last night were the Financials and Materials. The Financials were practically flat, but their Materials closed over one per cent lower. These are our two largest sectors, representing about 55% of the XJO. Secondly, there is debate about the RBA rate cuts in media and market commentary. Reports about dissent in the RBA itself, whether they should have cut yet, or whether they should continue to cut etc. Our market likely wants a clearer image. Thirdly, our banks have started to sell off and correct. This is long overdue, and their poor earnings reports have sobered up investors to ridiculous valuations. . Perhaps this is expected to continue. Finally, and quite simply, U.S futures have moved into the red – not atypical following a close into all-time highs.
Yesterday was a tumultuous day of trading, but we ended firmly in the red, breaking 8,450 key support. This morning we should open just below 8,400. 8,350 to 8,400 is the next key levels of support and also roughly where the 50 day MA comes in. Whilst our market digests all that is going on now, this seems like a good level to pause.
US Markets
US shares closed at record highs overnight, shrugging off recent negativity to push higher. There were no major news or events overnight for US markets, and instead, prices continued higher with the current bullish momentum. Valuations are definitely overblown here and they should probably have fallen with things like the tariff announcements, weak tech earnings, and persistent inflation. We will likely get a spike down at some point and probably soon, but the spike lower will also probably be short-lived as prices are being dragged higher by government spending, which is unlikely to change soon.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Healthcare the strongest performer, followed by Staples, and Energy stocks. Only Financials and Materials closed lower.
Technically, the SP500 broke above the all-time high resistance level which sits just above 6,100. This should indicate further upwards movement, however, we may first see a test of this previous resistance as potential support. Should it hold, we are likely to see further gains.
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