The XJO is expected to rally on open this morning following a similar move from the U.S overnight. Their futures are also mildly in the green.

Yesterday we opened higher, but it wasn’t until the CPI release at 11:30am (AEST) did our market truly drive higher. CPI came in as expected, but trimmed CPI came in slightly weaker than expected. Investors likely expect the RBA to now be sated, speculating that our central bank will not raise interest rates. Of course, key economic data will need to remain soft going forward, but the market is nearsighted and enjoying the vindication of the recent pump.

Yesterday we managed to peak our head through the all-time high resistance at roughly 8,080 and this morning we should break through convincingly as we open near 8,150. We have clearly outpaced the U.S in the short-term, so it would be hard to expect too much more from our market today. U.S futures are in the green though and the pump is on, and without a clear target it is hard to say where the next resistance will be formed. 8,080 now becomes the next support, with 8,000 roughly beyond that.

Looking more broadly, we head into reporting next week, which is bound to shake things up. No doubt our market will also sober up a bit and find another range to trade at some point. Until then however, we should expect the market to continue in the direction of the underlying uptrend.

US Markets

US shares closed higher overnight with each of the three major indices closing in the green. The DOW JONES saw the least buying as it was held back by a disappointing earnings result from Microsoft. US markets jumped after the Fed indicated a strong likelihood of a rate cut in September, and US markets are now pricing in a 100 percent chance of this happening. Rate cuts are positive for markets, and as an added bonus, economic activity and company earnings are expected to remain fairly strong. US shares now have pretty much everything they could ask for, but prices are extremely expensive at the current levels. After US markets closed, Facebook reported earnings results, beating expectations and sending US futures firmly higher in after market trading.

Seven of the eleven sector groups of the SP500 closed higher overnight, with Technology the strongest performer, followed by Discretionary stocks. Healthcare stocks saw the most selling, with Real Estate the second worst performer.

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