The XJO is expected to open higher this morning following a small rebound in the U.S overnight as they continue to track sidewards at the top of the range. Their futures have edged into the red however.

Yesterday was a dismal showing for our market as we fled back to the safety of roughly 7,050. With the U.S failing at their all-time highs, our market was reluctant to hold the gains from the past few sessions. Yesterday, the RBA held interest rates, and Bulloch’s address was more dovish than what we have seen from the RBA lately, however it was not enough to bring courage to our market. We did retrace from our lows however, and this morning we are expected to move back towards 7,100, so we haven’t given up completely just yet.

Ultimately, we are tracking sideward, which indecisive trading underpinning markets. It feels like our market is primed for a rally, with recent headwinds of interest rate rises, slowly becoming tailwinds as our market flirts with the idea that we too are actually at peak rates. Considering we are still trading under our 200 day MA, our economic data isn’t crashing, and coupled with the belief we are at peak rates, there is good reason for our market to start making some headway. However, we also see the U.S tracking sideward after such a breakneck rally, griding along their all-time highs, but unwilling to make new ones. The gradient of their uptrend is unsustainable and further sidewards movement by the very least, if not some profit taking is clearly due. And so, even though we may be primed for a move higher, our market simply does not want to risk rallying into a U.S pullback.

US Markets

US shares were mixed overnight, with the DOW JONES finishing in the red, while the SP500 was flat, and the NASDAQ closed higher. The big news in the US was bond yields continuing to fall, as investors continued to back the peak-rate view. This was supported by economic data overnight, with fewer than expected job openings in October, as well as an unexpected build-up in oil inventories. Overall, US share markets remain extremely positive given that bond yields are falling, and rate cuts are expected next year. However, given the extreme strength that has been seen recently, some profit taking shouldn’t be unexpected. The next major data event for US markets will come on Friday night with the release of US unemployment data.

Only three of the eleven sector groups of the SP500 managed to close higher overnight, with Technology and Discretionary the strongest performers. Materials and Energy stocks saw the most selling.

Technically, the SP500 is holding below the resistance at 4,600, seemingly stuck to the 4,550 level. This level has been magnetic for the index across the past fortnight, and until we see a clear directional break away from this level, its hard to take a bullish or bearish view. Overall the index does look a bit overbought, so we could see a higher trough in the short-term.

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