The XJO is expected to open modestly higher this morning, with futures pointing to an open around the potential resistance at 7,775. That 7,775 level has been a sticking point for the past week, so if we push through that level is could indicate further upwards movement.
There might be an additional level of resistance close by as high as 7,800, and if that breaks, we will likely see a rise back to 7,850. Should we see selling from here 7,700 is the key support to watch.
Our market remains in a holding pattern, waiting for a event or data release, or perhaps a move overseas, to shift us from the current level. Weak iron ore prices continue to be an anchor for our market, as does the local economic situation – with inflation still high but economic activity low. However, continued strength in US markets is allowing Australian investors to shake off these fears for now to continue following the bullish US moves.
Regardless, we continue to trade in the broad channel, and the U.S continues to look bullish. If they remain so then 7,850 to 7,900 at the top of the range is the next major target.
US Markets
US shares reopened higher after their public holiday overnight. However, prices fell throughout the session to close in the red on the SP500 and NASDAQ. The DOW JONES showed more strength however, finishing the session in the green as the strongest index. US markets continue trending higher with a hope that Fed rate cuts are coming soon, and a hope that company earnings will grow from here. Strong selling was seen in NVIDIA overnight, which likely dragged the SP500 and NASDAQ lower. There was a lack of major US economic data last night, but tonight we will see manufacturing and services PMIs, as well as the FED monetary report, all of which will give clues to the strength of the economy and expected timing of rate cuts, so don’t be surprised to see US markets experience directional movement tonight.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Energy and Utilities the strongest performers. Technology stocks saw the most selling. Most other sectors were flat.
Technically, the SP500 continues uptrending but it seems to have stalled out at the key 5,500; key because markets like round numbers. Should the market close above 5,500 the buying should continue and its hard to say where it will stall. Should we see selling, the previous resistance at 5,375 is now likely to act as support; should it break, we are likely to see further selling.
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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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