The XJO is expected to open flat this morning following both a similar close in the U.S last night and their futures this morning. Their market opened lower, but they managed to claw back the gains by close, indicating to our market that they are happy to continue tracking sideward for the time being – likely awaiting CPI, PPI, and FOMC minutes this week.
Our market sits in a much tighter consolidate range as we wait to see how the U.S trades from here. Our market was also closed yesterday for Easter. We are holding both the 50 and 100 day MAs, as well as key support and resistance at 7,200 and 7,250. Our market may also be still trading in a broader downtrend, which will be confirmed if we can’t clear these levels. Like the SP500, short-term indicators still put us in slightly overbought territory.
In the week ahead, we have U.S CPI data Wednesday night and U.S PPI data Thursday night. Markets will want to see inflation continue to fall to keep the Fed at bay. Locally, we want to see the U.S ease on hikes, as our own RBA has already assumed a position of wanting to ease. However, if the Fed continues its aggressive stance, our own RBA will find it difficult to ease as it will largely tank our dollar. On Thursday morning, FOMC minutes will be released which may also continue to help develop the narrative around inflation and monetary policy.
Tomorrow, Chinese CPI and PPI will be updated, which may have more of an affect on our miners. We also have local Westpac consumer confidence numbers, and NAB business confidence numbers tomorrow. On Thursday we have local employment data. Economic data helps inform our RBA as to the strength of the economy, which in turn helps them direct monetary policy. Our market will want to see week (but not terrible) data.
US Markets
The U.S last night had a mixed night of trading that reflected their move last Thursday. Selling dominated their early session but was overtook by the bulls into the close to finish fairly flat. We should expect this week to heat up though with plenty of price data to drive the narrative around inflation and monetary policy.
Six of the eleven sectors finished in the green, with industrials and energy the strongest gains (although both fell short of one per cent). The other five sectors sat marginally in the red, with consumer staples the worst of them with only a 0.69% fall.
The S&P500 looks like it bounced off the uptrend line and a key support at roughly 4,075 last night. Though they continue to track sideward and hold their ground, short term indicators still put their market in slightly overbought territory. The next key resistance is at 4,175 and the next key support if 4,075 breaks is back down at roughly 4,000.
The U.S continues to look bullish, however there are key pieces of price data being reported this week that can turn markets on a dime. On Wednesday night (10:30pm AEST) they have CPI data that is expected to weaken across the board (core, MoM, YoY). Furthermore, FOMC minutes will be released Thursday morning and PPI data will be updated on Thursday night. Markets will want to see inflation drop, desirably more than expected, to keep the Fed at bay from continued interest rate hikes. To finish off the week, they have retail sales numbers on Friday night.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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