The XJO is expected to open flat this morning following another flat US session. Our futures are pointing to an open around 7,330. Expect to see selling in the major miners after a large drop in iron ore prices. Iron ore has been falling strongly for some time, and there looks to be room to the downside for BHP, RIO, and FMG.
Our market continues to track sideways at the top of the recent range. Though it looks overbought, we will need to wait for a clear break either way before another directional move will look likely. One major event that could trigger a directional breakout will be Australian CPI, which will be released on Wednesday.
We are currently stuck between support around 7,310 and resistance at 7,375. This marks a very tight consolidation range. The uptrend line has certainly broken, and with us griding sideward along these key levels, it is hard to say where the next move for our market is. There is no clear defined trend in the short-term, except echoes of the recent strong run we have had.
Look for a break of either 7,310 or 7,375 as an indication that we could see some directional movement.
US Markets
US shares closed flat on Friday, with prices initally trading lower before recovering to close very slightly in the green. There was a lack of major economic and company earnings data, with Proctor and Gamble to largest of the reporting shares on Friday. Earnings season has so far been mostly positive for US markets, and there will be plenty more large-cap stocks this week. The upwards momentum does seem be be starting to wane for US markets, but the resilient earnings reports of this season are helping stocks maintain their levels. There is a lack of major US economic data again until Thursday night this week, where we will see US GDP for the first quarter. Most economists are expecting this reading to show the economy starting to slow, which is what investors will want to see given that inflation remains the number one concern.
Six of the eleven sector groups of the SP500 closed higher on Friday, with Discretionary, Staples, and Healthcare the best performers on the night. Materials and Energy stocks saw the most selling.
The S&P500 has now drifted sideways for long enough to break through the medium-term uptrend LINE. However, the index is still in an uptrend as defined by higher peaks and troughs, and so it continues to looks cautiously bullish. The next major resistance level is at 4,200, if that breaks, we should see further upwards movement. Should the index fall from here, it will have to break the support at 4,075, before it will look like falling further.
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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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