The XJO is expected to open higher this morning following a strong rally in the U.S on Friday. With pricing data easing in the U.S and in Europe, hope was reinstated that we are closer to peak rate hikes.
We should open near 7,200 this morning which is where a tentative downtrend line comes in, and the next key resistance. U.S futures have also edged into the green, and so there is a good chance we can push through today if they remain steady. Soon after 7,200 our market will face resistance at roughly 7,250 which is also roughly where the 50 day MA comes in.
However our market is also looking overbought in the short term, with the five days of uninterrupted gains. We should expect a breather soon, and 7,250 to 7,200 could be the cause for our market to pause. If we do see some profit taking, then roughly 7,100 might be some interim support.
In the week ahead: Today we have local retail sales and Chinese manufacturing, both of which are expected to be fairly flat. Tomorrow we have our RBA cash rate decision at 2:30, where it is expected that RBA either halts rate rises or hikes them by 15 basis points – our market will be trying to get future guidance from Lowe. On Wednesday we have Job openings data from U.S. On Thursday we have more manufacturing data from the U.S and China. And to finish the week, the U.S will release an update on the unemployment rate. Altogether, the economic data will continue to help markets get a better understanding as to how monetary policy may look going forward. Unless any of the economic data is particularly surprising, we shouldn’t expect it to shift markets.
US Markets
US markets jumped higher again on Friday, with prices moving strongly higher on the back of weaker-than-expected pricing data. US PCE price data came in lower than expected on Friday, as did Eurozone CPI; each of these price data coming in lower than expected helped to feed the hopes that central banks will soon stop lifting interest rates. In general, indications are that US economic data for March will likely be weaker than that of February, with the banking issues helping to weaken confidence and lower economic activity. It will be a short week this week and next week in the US, with the Easter long weekend.
Every major sector of the SP500 closed higher on Friday, with Discretionary and Real Estate stocks again the best performers on peak-rate hopes. Energy stocks saw the least buying with oil prices remaining weak in the short-term.
The SP500 broke above the potential resistance levels at 4,080 and 4,100 on Friday. Overall the index is continuing on its upwards movement and now looks like reaching the yearly high peak of around 4,200 index points. Should 4,200 break, the next upside target would be the 4,300 index points. Should the index fall from here, the uptrend line, which currently sits around 4,040, would be the likely downside target.
Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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