Our market is set to pause its falls on open this morning following an indecisive night of trading in the U.S last night. Their futures have edged into the green, and they managed to rebound from their lows and continue holding 4,200.
Our market yesterday continued lower, breaking the yearly lows at roughly 6,900 and thereby the bottom of the broader range we had been trading in. We overextended to the downside compared to the U.S, which is still holding their key support. Despite the U.S showing further willingness to hold overnight, our market is cautious and tentative this morning, not willing to retake some of the extended falls without further proof that the U.S will continue to hold. If U.S futures remain steadily in the green during our session today, our market may feel comfortable moving back to roughly 6,900.
In fairness, it is reasonable that our market is in disbelief that the U.S will continue to hold these levels, or by the very least, is agnostic to it. It’s a risk off environment, and even during the recent relief rallies, storm clouds have remained looming over markets. If we do see another relief rally, keep in mind that markets will still be trading in a downtrend, with another lower trough having just been created with the break of 6,900 support. The mainstream media will switch their news to be more positive during the rallies, but in reality, the issues surrounding markets are likely to remain until at least the end of the year.
If falls are to continue from here, then roughly 6,800 is the next key level, with roughly 6,700 the next level after that. These levels are over a year old, but are the most recent levels of support below 6,900.
US Markets
US shares closed fairly flat overnight after spending the session trading back and forth between the green and the red. There was a lack of major US economic data overnight, so instead prices fluctuated around key technical support levels. US markets have fallen for the past five sessions, so some buyers returning and short-positions being closed should be expected. There will again be little US economic data to shift the tone tonight, but we will see many major US companies report earnings, including Microsoft, Google, Visa, and more. These large reports are mostly occurring after the market closes tonight. Markets remain concerned about the massive rise in bond yields recently, suggesting a potential for more interest rate rises, or higher-for-longer interest rates, as well conflict in the middle east. Investors ideally want to see some sign that the economy is slowing, before yields are likely to come back down, until then, share prices are likely to continue to be volatile.
Only three of the eleven sector groups of the SP500 closed higher overnight, with Communications the strongest performers, followed by Technology Stocks. Energy stocks saw the most selling overnight.
Technically, the SP500 again tested the support level at 4,220 overnight, which it roughly held. This is the lowest support since the market broke higher in June of this year. The market is definitely seeing downwards momentum and it did set a lower peak in early October, indicating we could be seeing a lower trough. However, after five days of lower closes, don’t be surprised to see a short-term push higher.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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