The XJO is expected to edge higher on open this morning following a strong rally in the U.S overnight. Their futures are flat this morning.
Most of their rally was in tech, which is not as well represented in our market, and with a lamenting materials sector we will not likely rally to the same extent today.
Iron Ore continues to fall which weighs upon some of our largest stock, so it will likely be up to the banks and the rest of the market to hold ground. BHP is trading near very key levels of support, though RIO and FMG less so, so don’t be surprised if they continue to sell for now.
We are broadly in the same position we have been for the past month or two, where our market is struggling to follow the U.S, which unashamedly rises despite any news that is released. In recent history a strong inflation read would be a bad sign, but the past two reads where we have seen this, including last night, have been met with a continued run higher. Our strength has largely been seen in the banks, which are massively overvalued, whilst our miners remain tumultuous.
This ultimately keeps the direction of our market murky and particularly difficult to trade.
US Markets
US shares closed strongly higher overnight, with the SP500 closing at a fresh record. This was despite US CPI coming in stronger than expected for February, something that has solidified a view of rate cuts towards the middle of the year. The rise after the data is surprising, given that stronger inflation is usually and has recently been seen as negative for the stock market. However, the data was not too far outside the expected values, and the SP500 was trading around key support and the longer-term uptrend line. The data does also point to continued strength in the US economy, meaning that a soft landing to the current interest rate tightening cycle looks possible. Investors will now look to next week’s Federal Reserve meeting for the Fed’s take on the data and whether they change their tune about rate cuts in the near term.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Technology and Communications stocks the strongest performers. Utilities saw the most selling as they are interest rate sensitive stocks.
Technically, the SP500 is continuing along its longer-term uptrend line that has formed since October. Overnight the index bounced from the trend line and pushed back to the all-time high resistance level. Technically the index looks like rising further from here, but it will have to first exceed the intraday high from Friday, around 5,190.
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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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