The XJO is expected to open flat this morning following a small pullback from the U.S overnight. Yesterday, we had only a meek rise compared to the U.S on Friday, and U.S futures have edged into the green, likely giving our market reason to stay relatively flat despite last night’s selling.
7,200 is now the next key support that we may consolidate at whilst we wait and see how the U.S moves. April tends to be one of the more bullish months cyclically, though we have already had a strong run and are likely due for either some consolidation or profit taking as short-term indicators remain overbought.
Roughly 7,250 remains the resistance which is also where the 50 day MA comes in. Roughly 7,200, to 7,250 is likely our new home for the rest of the week as we head into a four day trading holiday over Easter.
The RBA held interest rates yesterday which the market shrugged at. Lowe indicated that there may be more rate rises into the future. Unfortunately, this will largely be dictated by the U.S. If they remain on the tightening war path, we will likely need to follow in order to keep our dollar competitive. The fact we want to pause rate hikes, whilst potentially being forced to, is not a good situation to be in when looking into the distant horizon.
US Markets
US shares closed lower on average overnight, with prices taking a breather after recent upwards movement. The selling comes after JP Morgan CEO Jamie Dimon gave his assessment on the Silicon Valley Bank collapse in which he stated that the issues of SVB are shared across the banking space. US economic data was mixed but mostly negative overnight, with weaker than expected factory orders and job openings, though there was a drawdown in oil inventories. Mostly weak economic data may be taken as a sign that inflation is falling and could be bullish for the market, but the oil draw down is not great for inflation, especially with OPEC cutting production.
Four of the eleven sector groups of the SP500 closed higher overnight, with only Communications and Utilities managing to record notable gains. Industrials, Energy, and Materials stocks saw a fair degree of selling.
The S&P500 has been in an upwards movement but overnight it took a breather and saw some selling. The index sold down but held above 4,100 as a potential support, which had previously been a resistance level. Should the index keep rising, the upside target would be the recent high at 4,200. Should the index fall from here, the uptrend line, which currently sits around 4,040, would be the likely downside target.
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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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