The XJO is expected to rally on open this morning near 8,915 at time of writing. This follows a strong U.S session that mirrored our own yesterday, as they broke through their key resistance to stick their head into new all-time highs. Their futures are flat.
Yesterday the RBA cut rates as expected. However, there was very little future guidance from Bullock, who instead reinforced that data had trended the right way to justify the recent cuts. As usual, they maintained a wait and see stance, which the market once again interpreted as dovish. Like the U.S last night, we broke key resistance, at roughly 8,850, and stuck our head into all-time highs. With the U.S confirming their own break overnight, we are expected to continue that move with an expected open just above 8,900.
Keep in mind, when our market makes fresh all-time highs in a convincing manor, it usually pulls back immediately or within a handful of days of consolidation. Of course, that may not be the case this time around, but it is quite rare for our market to continue making consecutive fresh highs.
Like the two previous all-time high resistances, roughly 8,850 is now key support. However, if our market does have any semblance of a selldown, the 8,650 and a mean reversion back to the 50 MA seems likely.
Finally, CBA reports today. It is the most expensive bank in the world – by a good measure. It is also the largest stock on our market. It will be interesting to see if the report can indeed justify the current share price, or if the chickens come home to roost. If CBA does selldown, our market will need to find strength elsewhere, likely our miners, in order to do anything but fall.
With both the RBA and U.S CPI now out of the way, there is little else to expect other than our market to continue sidewards to higher. Of course, we remain cautious, but the technicals so far have held well, and we should continue to expect them to do so.
US Markets
US shares jumped highe overnight, jumping to fresh all-time highs with the July inflation data. The data showed headline inflation was rising by slightly less than expected, at the same pace of June, while core inflation rose slightly more than expected. Core inflation, a measure of underlying inflation, posted its largest gain in six months. While not good, the market has taken this as a sign that the Federal Reserve will keep cutting interest rates from here. The probability of a 25 basis point rate cut at the Federal Reserve’s mid-September policy meeting increased to more than 90 per cent according to financial markets. It seems that the bullishness is so strong that it will take a very negative item at the moment to trigger selling.
All eleven sector groups of the SP500 closed higher overnight, with Communications, Technology, Financials and Materials the best performers.
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.
Want to continue reading?
This is only an excerpt from todays TradersCircle Members Morning Market Update and doesn’t include the key data and charts our traders are keeping an eye on every day. Become a member today for this plus full length mid-day and end of day updates, trade recommendations, trade group webcasts, and much more!