The XJO is expected to open higher this morning near 8,870 at time of writing. The U.S popped up on open last night, moving into fresh highs. Though, most of their movement happened on open and their overall session was fairly lacklustre.
Our open should reverse most of yesterday’s selldown. This means we are also likely to retest the new all-time high resistance at roughly 8,900 today. However, it is hard to suggest we will push through.
Yesterday, much of the selldown for our index was likely attributed to CBA’s reaction to their earnings report. CBA is our largest stock by market cap. Its valuations, like many blue chips in our market, are highly stretched. Earnings reports so far have largely led to harsh intraday falls as investors struggle to justify share prices. CBA was no different, and when our largest stock falls by a good measure, our index struggles to hold ground, let alone rise. Had CBA not had its earnings yesterday, it seems reasonable to suggest our market would have continued to make fresh highs from Tuesday’s break higher. CBA is still the most expensive bank in the world, but our market seems to have a very short memory for the time being. For our market to pop back up today, CBA will likely stabilise if not crawl back some of the losses from yesterday.
And this is really the point. Regardless of earnings reports, fundamental data, macroeconomic data etc., the market continues to trade quite technically. That is, in essence, sidewards to higher. We have moments of consolidation at the top of the range, forming ascending triangles and/or channels, and then simply break higher into fresh highs.
Of course, we remain cautious. A correction is inevitable, as is a bear market at some point. It may be reasonable to even suggest that we should have already be in one. When this does indeed occur, it seems somewhat likely that it will happen with aggression, rather than a gradual move down. However, it is impossible to know when this will happen, and from a short-term trading perspective, it is largely irrelevant.
Please check your trades on open, and be aware of upcoming earnings reports for trades you are in or considering entering.
US Markets
US shares closed mostly higher overnight, with notable gains in the DOW JONES, while the NASDAQ and SP500 saw more moderate buying. Regardless, US shares pushed further into all-time highs, though prices struggled to hold the highs of the session. US investors are scrambling to price in further rate cuts after recently weak economic data, with sentiment remaining strong due to a fairly positive US earnings season. The probability of a quarter point rate cut at the Fed’s mid-September meeting reached 97.9 per overnight according to financial markets. There was otherwise no major economic news or data overnight, and instead prices continued with the current bullish momentum.
Eight on the eleven sector groups of the SP500 closed higher overnight, with Materials, Healthcare, and Discretionary the best performers. Communications stocks saw the most selling.
Technically, the SP500 broke through the all-time high resistance at 6,400. With a break of this level, further upside will look likely. The index remains on an uptrend with higher peaks and troughs, so we must assume further upside from here.
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