The XJO is expected to open flat this morning following a small recovery in the U.S overnight that saw them willing to hold their key support at the bottom of their range. Their futures are flat.

Markets are unsure. The past couple of sessions have seen our market retake intraday lows to finish marginally in the green. There is uncertainty and indecisiveness underpinning our market at these levels, however we can at least be confident that our market is willing to hold key supports and the bottom of the range.

How we trade from here is hard to know. We could see a small relief rally, with 7,100, 7,150, and 7,200 the next key levels of resistance. Otherwise, if selling persists in the U.S, then 7,050, 7000, 6,950 and 6,900 are the next key supports. Basically, every 50 point increment to the upside and downside are the likely stopping points for directional movement.

We will need to wait and see how markets continue to digest the future guidance from the Fed last week, and the looming government shutdown in the U.S.

US Markets

US shares closed slightly higher overnight, with prices finishing slightly in the green after initially trading lower. The modest gains come after a string of bearish session for US markets. US markets have been falling after the Federal Reserve meeting for September on Wednesday last week, where the ‘Fed’ stated their belief that another interest rate rise will likely be needed to control inflation and that there are less likely to be interest rate cuts next year. This is not what share investors wanted to hear, and so they have been selling down stocks since. There was a lack of other US economic data overnight, but the bearish momentum did slow, which could simply be ascribed to a bit of bottom feeding after last week’s strong selling. US markets are not out of the woods yet though, and we will likely need to see economic data start to weaken (suggesting inflation is slowing) before markets notably rebound.

Eight of the eleven sector groups of the SP500 closed higher overnight, with Energy the strongest performing sector. Materials and Discretionary stocks also saw reasonable buying. Staples stocks saw the most selling.

Technically the SP500 has broken below several key levels of supports, including 4,450 and 4,350. The index is now setting lower peaks and troughs in the short-term, suggesting it may keep falling. The index did bounce back above the next level of support at 4,330 overnight, which suggests a potential for a small rebound in the short-term, though overall the momentum does remain to the downside.

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