The XJO is expected to open flat this morning following another small rise in the U.S overnight.

Yesterday the RBA raised the cash rate by 25 basis point from 4.1% to 4.35%. The statement was rather wishy-washy, but indicated that they feel we have seen peak inflation and that it would be likely unnecessary to raise rates further, provided there weren’t any shocks in key economic data.

The market reacted with a quick fall, that was just as quickly met with a strong rally, pushing above the price our market was at just prior to the announcement. All in all however, we simply had a sideward day where we held both the key resistance at 7,000 and the downtrend line. With the U.S also showing again last night that they want to hold resistance, our market will likely either track sideward today or even fall back to 6,950 or lower if U.S futures turn red and herald a rebound from their tonight.

Short-term indicators are overbought, and with our market having moved back to the downtrend line, we would assume the next broader move is back towards our lows.

US Markets

US shares closed higher overnight, continuing the bullish run for US shares. The SP500 has now closed higher for seven sessions in a row, which is a monumental bullish move and goes to show how much sentiment has shifted following the Federal Reserve meeting at the start of the month. US markets have been rallying on the belief that interest rates have peaked, and that the next move will likely be lower. This is a huge shift in the factors that have been driving markets for the past 18-months, so we could see an uptrend be established by US shares as a result. However, after such strong upwards movement, a breather and some profit taking could be seen.

Five of the eleven sectors of the SP500 closed higher overnight. Discretionary and Technology stocks were the strongest performers overnight. Materials and Energy stocks were the worst performers after big selling in oil and other commodities.

Technically the SP500 is slowing around some potential resistance at 4,385. The index will have to close above this level for further gains to look likely. Should the index close above this level, it will be a sign of a change in trend and futher upwards movement should be expected. Should the index fall from here, its hard to say where it would find support, but we would be looking for some sign of a higher trough.

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