The XJO is expected to rally on open this morning following a strong night of buying across the board in the U.S. Their futures are flat.
Yesterday our market only finished marginally in the green. U.S futures heralded their strong move overnight, but our market is once again trading cynically and cautiously, and would rather wait for the proof before pricing in expected overseas gains.
Even so, our expected open this morning is only at 7,975 – not what we would have typically expected after a strong move overnight, especially considering U.S Financials were up close to two per cent, and their Materials were up over one per cent. Our muted open is further evidence that we are trading how we use to trade before the bull run last year: cynically. The U.S move overnight brought them back to their 200 day MA – a point that can be considered longer-term parity. Our market is about two per cent away, indicating further that we are still reluctant in sharing their gains, but more than happy to price in their losses.
Our banks remain expensive and likely overvalued. Now that their gold plating has flaked off, it would be hard to suggest we will see them return to any sustainable bullish momentum. This might mean that if our market is to continue higher, it will need to find strength in the Materials, our second largest sector. Unfortunately our Materials have largely been left behind since the bull run began last year, with sad iron ore prices. Perhaps this will change though.
What continues to seem like the most likely outcome however is that our market continues to track sidewards, albeit perhaps in broader range. From there, we should expect our market to test the recent lows once again, with an expectation that Trump will continue to be tough on trade.
US Markets
US shares jumped overnight, with strong gains across each of the three major indices. US shares jumped on a supposed tariff rethink from President Trump, who stated to reporters that he might be flexible on certain countries. “I may give a lot of countries breaks,” Trump said. We will obviously need to wait for further news about the reciprocal tariffs coming on the 2nd of April, but it is worth remembering any tariff will be a negative for the market. Still, there is plenty of liquidity being pumped into the market from extreme levels of net US government spending, which is only growing under Trump – this money has to go somewhere and some of it will flow into shares – its not that shares are getting more valuable, just that money is getting less valuable.
Ten of the eleven sector groups of the SP500 closed higher overnight, with Discretionary stocks the standout performers, while Communications, Industrials, Financials, Technology, Real Estate, and Materials stocks also fared well. Only Utilities closed lower on average.
Technically, the SP500 broke above the short-term downtrend line and resistance level at 5,700 overnight. With the break above 5,700, we should see a move to the key 5,850 resistance level. However, the index will first have to close above the 200-day moving average, which it closed at overnight. Should the index resume falling, the recent lows around 5,550 are likely to act as support.
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