The XJO Is expected to open higher this morning following a strong rebound in the U.S overnight. Their futures are slightly in the green.
It seems both markets are just hanging around their 50 day MA as we await both the U.S election results and the U.S fed meeting on Thursday night.
The RBA was rather hawkish yesterday in its statement on monetary policy, pointing to sticky inflation and pushing out the projection of when inflation will normalise. Our market didn’t care. Perhaps they have banked it for now and will cash it when markets inevitably do correct – but perhaps it will get lost in the sauce by then.
The short-term downtrend line remains in play. If we continue to track sideward, we should meet it soon. However, the medium and longer term trend remains firmly bullish. In essence we are trading in a pennant, even if we can’t get the lines to shape up. Typically, we would expect the underling trend to win, and for our market to therefore return back towards its all-time highs, however with the election on, it is hard to say.
Ultimately, with the nature of this election we could see a drawn-out process, with Trump’s rhetoric already returning to the narrative of election fraud should he lose. If this is the case, and unrest occurs in any meaningful measure, it is hard to say how the market will react. Perhaps it wont care. Our general view is cautiously sidewards (with a little bullishness mixed in).
US Markets
US shares closed higher overnight, with each of the three major indices closing firmly in the green. US shares moved higher ahead of the Presidential Election, whose results should start coming in during our session today. The result is expected to be extremely close, and the result might not be known for a few days. Typically, US markets have rallied after a Presidential Election, though often there is some volatility immediately around the event – sometimes the rally takes a bit of time to get going. The Federal Reserve will also meet tomorrow night to decide on interest rates, and they are expected to cut by another 25 basis points, though the chance and pace of rate cuts moving forwards seems to be slowing.
All eleven sector groups of the SP500 closed in the green overnight, with Discretionary, Industrials, and Utilities the strongest performers. Most other sectors also closed higher.
Overnight the SP500 bounced off the next support at roughly 5,700 and rose to roughly 5,780 as a potential resistance. Unless we see a further rise from here, we could be witnessing a lower peak, which could indicate further selling to come. Regardless, the next directional move will likely be decided by the election.
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