The Nasdaq index jumped again overnight as money flows back towards Growth stocks. A combined positive sentiment towards interest rates and company earnings is seeing renewed optimism in this space. The Nasdaq index has now broken the downtrend and is trading back near the 200-day MA. If it continues through current resistance, there will be technical signals of a change of trend.
The better-than-expected GDP number overnight is a sign, that the US perhaps can get away with a soft landing or, mild recession. The full effect of the large rise in rates throughout 2022 will be seen through this year, so it is too early to call, but the signs that the US economy can hold up seem positive.
All in all, with the US CPI now out of the way the next big event for interest rates will be the FED meeting on the 1st of February. At this stage, they are expected to lift rates by 25 basis points. If inflation continues to ease and the mood on rates continues to become more neutral to dovish then markets will likely lift further this year in particular the beaten-down growth space.
China for the most part will close this week for Lunar New Year. This also means Iron Ore Futures will not trade. Often Iron Ore rallies into this holiday period and can sell off after. So be wary of the miners coming into the February period.
Australian Outlook
The XJO is expected to move higher on open this morning following a strong night of buying in the U.S. Their futures are flat this morning, not giving our market much indication as to whether the strength will continue tonight or not.
The market was closed yesterday for Australia day. On Wednesday we had the first pullback in what feels like weeks of a relatively unchecked super rally. This morning’s open however promises to retake those losses and move through 7,500 – showing that Wednesday was a momentary blip likely caused by higher than expected local CPI numbers.
Having moved through key resistance at roughly 7,450 on Tuesday, we can now look to it becoming support which we held Wednesday. From here, the next key resistance is 7,550, one short stop away from all time highs at roughly 7,600.
Short-term indicators are still overbought, and the gradient of the rally still feels unsustainable. Despite the continued buying, we should expect some consolidation and/or short-term healthy profit taking to come in soon.
US Markets
US shares reversed strong losses to close higher on Wednesday and then jumped higher in the overnight session. Shares were buoyed by strong company earnings reporting, with Microsoft and Tesla both jumping on their results. Additionally, there was strong economic data from US markets, with US fourth quarter GDP coming in better than expected, as did initial jobless claims. Currently US markets remain griding higher and are in the process of breaking the downtrend lines that have been in place for 2022. Time will tell if they will establish new trends, or if this is just a shallowing of the downtrend. The US Federal Reserve interest rate decision will come on the first of February, and this event does have the potential to generate some volatility.
Ten of the eleven sector groups of the SP500 closed higher on Friday, with only Staples finishing in the red. Energy was the strongest performer, followed by Discretionary, Communications, and Technology.
Technically, the SP500 has now broken the longer-term downtrend line that has formed since the start of 2022, meaning that we could start to see a new trend for 2023. The next major resistance level to the upside is the 4,100-point level.
Want to learn how to trade?
The team at TradersCircle/Emerald Financial have released a free online stock market education course, click here to enrol and get started.
- US shares tumble as bond yields soar, XJO to drop - February 22, 2023
- US market drops with hawkish Fed comments - February 17, 2023
- US market grinds higher, XJO to follow - February 16, 2023
Leave a Comment
You must be logged in to post a comment.