The XJO is expected to continue its decent today following another night of selling in the U.S overnight. Their futures have also edged into the red.

Bond yield have been rallying the past couple of days, fuelled likely by the conflict in Israel, but mostly by Powell delivering a hawkish address last night. “Inflation is still too high” will be ringing across markets like a crystal bell, cutting through the usual noise and ambiguity. “higher-for-longer” and another rate rise soon is entrenching itself in the market, and we should expect the negative sentiment to remain until the market decides this reality is priced in.

We should test 6,900 today. This level has roughly been the lows for our market over the past year or so. Recently we tested it, but managed to hold, which was then proceeded by a strong relief rally. We should still expect this historic level to hold in the short-term, as the U.S has yet to hit their own key supports at roughly 4,200. Our market could give up early, though we would likely need to see harshly red U.S futures heralding a break of their own support. The move yesterday also continued the downtrend we have been trading in since the start of August. This would typically translate to an eventual break of 6,900 to make a lower trough. If this occurs then 6,850 is an interim support, with 6,800 the next key level.

US Markets

US shares closed lower again overnight after Federal Reserve members again left the door open for potentially another US rate rise. US government bond yields continued to push higher after the comments, which included Fed Chair Jerome Powell stating that “inflation is still too high”, and that “there may still be meaningful tightening in the pipeline”. Not what markets want to hear. Prices did spend parts of the overnight session in the green, but they finished in the red and around their lows. There will be more comments from Fed members tonight. Share markets will want to see clear signs of a slowdown in economic data from here before rebounding, US data continues to look strong, and so far the economy has been resilient to the recent rate rises. There isn’t a whole lot of major US economic data until late next week when GDP will be released.

Ten of the eleven sector groups of the SP500 closed lower overnight, with Discretionary and Real Estate stocks faring poorly as they are sensitive to interest rates. Communications shares were the only ones to close higher after Netflix reported better than expected.

Technically, the SP500 continued lower after breaking below the potential support level at 4,330. Overall it now looks to have set a lower peak across the past week. The index is on a downwards move and now looks like heading back towards the 200-day moving average, which is also roughly where the longer-term uptrend line sits, currently around 4,250.

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