The XJO is expected to open higher this morning following a continued move higher in the U.S overnight.
Yesterday we tried to follow them higher from their initial rebound on Monday night, however we seemed to just give up halfway through the day to give up virtually all the opening rally. Considering the negativity underpinning markets, we likely were just in disbelief that the U.S rebound would lead to any reasonable move higher.
We may see a similar thing today. Even though they kept moving higher, our market is likely unwilling to commit too much to the upside prior to both the Fed and RBA interest rate decisions early tomorrow morning and next Tuesday respectively. Furthermore, U.S futures have moved into the red, and if they remain so during our session, once again expect most of the rally to be priced in on open.
We are trading near the bottom of the range, and our next movement will likely be dictated by how the U.S reacts to their Fed meeting tonight. A large reason for the falls we have experienced over the past few months is due to an expectation that locally we are likely due for another rate rise, and in the U.S that they are likely to remain higher-for-longer. Markets will be looking for future guidance and if the Fed remains hawkish we could see markets make new lows. Otherwise, we have formed a decent base to rally from – though we have our own RBA decision on Tuesday that may keep us on a leash.
6,750, 6,700, and 6,650 are the next targets to the downside. Otherwise, an accelerated downtrend line comes in roughly where we are now, and there is key resistance at roughly 6,830 and 6,900.
US Markets
US shares closed higher overnight, with each of the three major indices finishing in the green. It was a fairly quiet session and prices seemed simply to continue their momentum from Monday’s gains. Likely US markets remain positive that the Israel-Palestine situation hasn’t really spilled over into neighbouring countries. There wasn’t a whole heap of economic data from the US overnight, though US markets may have received a boost from European CPI data, which showed that European CPI is lower than expected, and ground at 2.9% YoY, back towards target levels. There will be some US economic data tonight, but the main event will be the Federal Reserve meeting on Thursday night. Though the Fed is unlikely to raise interest rates, investors will be looking for any clues around the likelihood of rate rises moving forwards.
Every major sector of the S&P500 closed higher overnight, with Real Estate the strongest performer, followed by Financials, and Utilities stocks. Energy and Communications stocks saw the least buying.
Technically, the S&P500 is in an overall downwards move, with lower peaks and troughs being set, the index may have set a lower trough on Friday however at the 4,100-point level, which may now act as support. The index looks like it will now move to set a new peak, but this peak is likely to be lower than previous levels. 4,200 – 4,220 is a potential upside target.
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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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