Australian Markets
The XJO is expected to edge lower this morning following a similar night in the U.S. Coupled with their green futures, we are getting early indications that the bleeding has been stemmed for now – providing a much-needed breath of relief from the past few sessions of pain.
Yesterday we tried our best to retreat inside the shorter-term Bollinger bands, regaining just over a third of the day’s losses by close. The shorter term stochastic also sit in the oversold area and the rebound was enough to make them cross over. There is also plenty of strong support around here. We clearly bounced off the key support at roughly 6,600 and finished to sit in an old but unique consolidation range that played out back from November 2020 through to April 2021. The range is roughly from 6,600 to 6,800 with plenty of activity in between. We may find some comfort here, but we would of course need to see the U.S settle too. When markets are fear selling and moving fundamentally, they still tend to target key supports, but trading ranges can be forgotten very quickly.
With the recent volatility, if we do recover then we should expect 6,800 to be the next level of key resistance. On the other hand, if we fail here and see further selling then there isn’t much in the way of support until 6,200.
US Markets
US shares closed strongly higher on Friday, with each of the three major indices finishing strongly in the green. Prices opened firmly higher and continued to rally throughout the day to finish around the highs of the session. It was with the US jobs report coming in mostly better than expected, with more jobs created than expected, as well as with a lift in the participation rate, which caused a slight lift in unemployment. Overall, the jobs data was the perfect blend of showing a strong economy, while also being somewhat deflationary. Optimism around the debt ceiling resolution also seems to be helping sentiment at the moment, so for now, a positive slant for US shares looks likely, as long as economic data continues to show a soft landing.
All of the sector groups of the SP500 closed higher on Friday, with Materials, Industrials, and Energy stocks the strongest performers. Communications and Technology stocks saw the least buying.
The SP500 closed convincingly beyond the 4,200 level on Friday, with the index now looking technically bullish towards the resistances at 4,300 – 4,320. Those levels aren’t too far away now and they could be reached in the coming sessions. Should the index fall from here, the 4,200 level will likely act as support against any downside move.
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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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