The XJO is expected to open around 10 points higher today at roughly 8,810 index points. This comes after US markets managed to close higher again overnight.
It really does seem like the XJO wants to fall, with strong US leads failing to translate into gains for the Australian market. This could be due to poor reporting from CBA, which has fallen strongly since its quarterly report on Tuesday, as well as relatively weak iron ore prices, and a lack of expected RBA rate cuts.
The RBA rate cut odds could change today however with Australian unemployment data to be released at 11:30 AM AEDT. The market wants unemployment to rise, as it will increase the change of rate cuts. Unemployment is expected to edge lower.
Regardless, despite the local negativity, its hard to see the XJO breaking lower as long as US markets are rising.
Technically, the XJO is holding above support at 8,750, but below resistance at 8,880-8,900. We will need to see one of those levels break before further movement looks likely. Until then, the XJO looks sideways.
US Markets
US shares jumped on open overnight but they weren’t able to maintain the intra-day peaks, and they fell off a little from the open. Still, it was a positive session for US shares, their fourth in a row. US shares have been rising with the deal to reopen the US government. A vote will shortly take place on a compromise that would restore funding to government agencies. The shutdown has also meant no economic data, which means that we have little idea whether the Federal Reserve will cut rates in December. The market is certaintly pricing it in though. So should the upcoming data (some of which will be retrospective and delayed due to the shutdown), prevent a rate cut, we are likely to see some profit taking for US markets.
Six of the eleven sector groups of the SP500 closed higher overnight, with Healthcare, Financials, and Materials the best performers. Energy, Communications, and Discretionary stocks saw the most selling.
Technically, the SP500 has been continuing higher after bouncing from its longer-term uptrend line, which is also the lower bound of an ascending channel. The index has been on an uptrend and potentially an acsending channel but had worked its way back to the bottom of the channel. With a bounce from the bottom of the channel (and also a support level and 50-day moving average), we would now expect a rise back to the all-time high resistance of 6,900, or beyond. The index is now pretty close to 6,900, so we will need to watch closely in the coming sessions to see if that level breaks. The stochastic is also pointing higher, which also confirms a likelihood of upwards movement.
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