Strong fall expected on open as Fed members suggest more rate rises

The XJO is expected to open lower this morning following a strong bearish move from the U.S last night following jobs data and pre-Powell-speech-jitters.

Our futures have us trading at key support at 7,100 at time of writing. U.S futures are in the green however, so hopefully we see some pressure relieved as market open approaches. The U.S last night did not test their own key support, so it would seem dramatic to break our own today unless U.S futures reverse and indicate further selling tonight.

Unfortunately, our market has been rather dramatic lately – reluctantly rising, and giving up with any hint of selling. So, there is decent chance that we pessimistically break support and over-extend to the downside today – but hopefully U.S futures are positive enough to keep us buoyed.

The next key support is 7,000, with 7,050 a decent interim support on the way there. Following that, we have 6,950 and 6,900 which represent the bottom of our market in recent history. Sentiment is swinging like a pendulum, but its important to remember that our market is quite clearly trading in a downtrend now, and these levels are realistic until the U.S shows us otherwise.

Powell will speak tonight. This seems likely to push markets one way or the other.

US Markets

US shares fell strongly overnight as Federal Reserve officials started to meet at their yearly policy symposium. The selling came after comments from some attending officials that the ‘Fed’ might not be done with the interest rate rises, and that there may need to be additional incremental rate rises before a peak is reached. Officials pointed to resilience in the US economy as a sign that they “have more to do”. US economic data was mixed overnight but it did point to resilience, with fewer jobless claims than expected, while there were less durable goods orders than expected. The Fed’s Jackson Hole meetings will continue tonight, so there is further risk we see volatility after speeches from members. Bullish investors will be hoping for softer statements from members tonight.

Every major sector of the SP500 closed lower overnight, with Technology, Communications, and Discretionary stocks the weakest performers. Financials, Materials, and Real Estate stocks saw comparatively little selling.

Technically, though the SP500 remains on a downtrend and overnight it bounced down from the resistance at 4,450. The index now looks like falling back to the recent support at 4,325, which would have to break for further selling to look likely.

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