The XJO is expected to open lower this morning following renewed selling in the U.S overnight which saw their market commit to the break lower. Their futures have edged into the green however.

We should open near 7,000. If U.S futures remain positive during our session, it seems very likely we hold 6,950 to 7,000 today, reinforcing the belief that our market is not ready to break the broader trading range.

There is a short-term downtrend line we bounced off yesterday and short-term indicators are indicating our market is reaching oversold territory. With a retesting of key support at the bottom of the range, we may see a small relief rally, however we will need to see that downtrend line break for anything meaningful to occur.

The U.S is at an interim support, but the next key level is back at 4,200. If selling persists, then our market will likely be forced to retest the key supports down here at the bottom of the range. At this stage, it is hard to know whether they will hold.

Australian Outlook

US shares closed firmly lower again overnight, with strong selling across each of the three major indices. Shares continued their bearish momentum after last week’s strong selling following the Fed meeting for September. The Fed suggested that another rate rise may be likely, and that rates will stay higher for longer. This has sent bond yields and the US dollar higher, which also aren’t great for shares. US economic data overnight was mostly a little weaker than expected, which lower Consumer Confidence, Building Permits, and Fewer New Home Sales than expected. There was also a small build-up in crude inventories. Overall, US investors will likely want to see some economic slowing before they commit to significant buying.

Every major sector of the SP500 closed lower overnight, with Utilities the worst performers, followed by Discretionary stocks. Energy stocks saw the least selling, but every other sector saw notable falls.

Technically the SP500 has broken below several key levels of supports, most recently breaking below 4,330. The index is now setting lower peaks and troughs in the short-term, suggesting it may keep falling. Potential targets to the downside include the 4,250 level, followed by the 4,200 level, both of which aren’t too far away now.

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