Australian Markets
The XJO is expected to edge lower on open this morning following both a small pullback in the U.S. last night and their marginally lower futures this morning. Their pullback looks like a small breather at this stage, though it could be forming an evening star reversal pattern. If this plays out and they fall back towards key support at roughly 4,200, our market will almost certainly follow suit.
We should open near 7,175. 7,200 seems to have been largely ignored recently, with 7,150, 7,130, and 7,080 being the levels our market has bounced from. Our pullback today will also have us roughly rebounding from the downtrend line as we potentially go on to make a lower peak and continue the downtrend.
We have the RBA cash rate decision today where it is basically a coin flip as to whether they raise rates or not. Pundits seem to be split, but here in the office we largely think they are likely to raise rates again. Regardless, we believe a rate rise is mostly priced into our market, but it may cause an extended fall today. Markets will also want to see get some future guidance from Lowe.
US Markets
US shares closed moderately lower overnight, ending the recent string of gains for US shares. Movements were relatively small, with prices initially trading higher before pulling back late to close in the red. US economic data overnight was mostly weaker than expected, with Services PMIs and Manufacturing orders coming in weaker than expected. One bright spot was tech-giant APPLE, which rose to record highs after displaying a load of new products including a VR headset. US markets remain in an overall upwards move, but don’t be surprised to see them start to run out of steam, with plenty of concern still centered around the coming economic downturn and the likelihood of further interest rate rises.
Four of the eleven sector groups of the S&P500 closed higher overnight, with Communications and Utilities faring the best. Industrials and Energy stocks saw the most selling.
The S&P500 closed convincingly beyond the 4,200 level on Friday, with the index now looking technically bullish towards the resistances at 4,300 – 4,320. Those levels aren’t too far away now and they could be reached in the coming sessions. Should the index fall from here, the 4,200 level will likely act as support against any downside move.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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