The XJO is expected to open flat this morning despite the U.S committing to the break lower and continuing their falls. Their futures have edged into the green, which may help prescribe some of the uncharacteristic resilience our market is showing this morning. It may also be because our market has led the falls, breaking our key support at 6,900 and extending losses before the U.S did with the same. Finally, there may be a shred of confidence that the U.S has now technically corrected since its highs in July and markets are at a point where a relief rally is due.
Despite this moment of respite for our market, negativity undoubtedly underpins markets. This Wednesday we saw our CPI come in slightly stronger than expected, and last night we saw U.S GDP come quite stronger than expected – with a good portion of it caused by consumer spending. This of course translates to there being a stronger likelihood that both the RBA and Fed will feel the need to deliver a rate rise before the year is out.
We are expected to open near 6,800, however it is hard to believe our market won’t follow the U.S lower in our session today, unless U.S futures rally hard enough to keep our market sated. Participants may be simply feeling that ‘enough is enough’ and that a relief rally is due at these low levels. We wouldn’t typically expect a relief rally to directly follow such negative reports in both a key economic data release, and poor tech earnings, however from a technical perspective we should be expecting one soon.
If 6,800 breaks, then 6,700 is the next key support. If we do see a relief rally soon, then 6,900 seems the first reasonable target.
US Markets
US shares fell again overnight as prices continued their recent downwards momentum. Economic data showed the US economy grew very rapidly in the third quarter, faster than expected and at the fastest pace in two years. This is not what investors want to see, investors want an economic slowdown as inflation is still the biggest concern and this data looked inflationary. US markets are also in a company earnings reporting season, which so far has been a little better than average. However, this time around, better than expected results haven’t been enough to force prices higher. After market, Amazon reported better than expected, though their shares were slightly lower in aftermarket trading. Tonight we will see personal consumption expenditure from the US economy, and this report could be seen as another gauge on inflation.
Only three of the eleven sector groups of the SP500 closed higher overnight, which were Real Estate, Utilities, and Materials. Discretionary, Communications, and Technology stocks were the worst performers.
Technically, the SP500 is continuing to break lower after breaking below potential support at 4,200 and then 4,150 overnight. The index is definitely in a downtrend with lower peaks and troughs and it is currently in the phase of recording a lower trough. Its hard to say exactly where this will be, but there are support levels around 4,100 and 4,050 that could hold the market. Should the index rebound from here, we would expect to see a lower peak, with the first upside target being around 4,200.
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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.
Latest posts by Karo Cornips (see all)
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