On Friday, US markets rallied into their 4th straight day following the FED meeting. It seems investors could be getting their heads around all the uncertainty that has hit in the past few months. It has also helped that Crude has not run to $180US a barrel as many were predicting. Perhaps commodities have priced in the worst of it?
Only time will tell but for now Crude has settled around 100 US a barrel, gas prices have eased. Metals have calmed down from their February highs as have many agriculture products. If prices stay here, we will see a large jump in inflation, but we may have found the top. Even though the FED has not yet raised rates to over 1% the market is already pricing this in, therefore the effects are brought forward. Investors seem content on this right now.
If we take out the Russian/Ukraine situation, we are fairly bullish markets as they are somewhat oversold. But depending on how that plays out we could see the rally come to a quick end. At any stage, things can escalate which could quickly see commodities rise again and markets fall.
Australian Outlook
The XJO is expected to rally on open following another strong day in the U.S on Friday. U.S futures also sit mildly in the green, giving no indication that the stella run over the past few days is to be met with profit taking just yet. Regardless, our market is typically skeptical at best, and will likely be cautious going forward, looking for any signs that the U.S will have a rest.
Our open this morning puts us around 7,350. If all our movement today isn’t baked into the open, we may test the next key resistance at 7,400. Between 7,200 and 7,400 though there are plenty of levels to keep our market tar pitted. Indeed, the 50, 100 and 200 hang around these levels and have done since last year, expressing our markets comfort in this range. Our expected open this morning should also get us close to completing a double bottom, with the expected move coming out of that pattern being roughly to 7,350 to 7,400. With it completing and coupled with the recent run in the U.S, it might warrant caution in the short-term. Furthermore, the short-term stochastic are also getting in the overbought area.
When we do see some profit taking, 7300, and 7,200 should both act as key supports going forward. 7,200 is also where the 50 day MA comes in as well as the short term uptrend line that market has been forming since its recent lows.
Today China’s loan prime rate (perhaps translatable to western cash rates) will be released at 12:15. Tomorrow and Wednesday Powell will speak, giving the market more to digest in the way of future interest rates. For the rest of the weak, new home sales and durable goods will come out of the U.S. These numbers aren’t particularly important though the market will be watching them as an indication of economic health.
US Market
US shares closed higher again on Friday, with the three major indices enjoying their fourth day of green bars in a row. There was a lack of significant economic data, though we did see a report showing fewer home sales than expected in February. Markets instead focused on the recent economic agreements between the US and China, and the relative lack of success of the Russian invasion of Ukraine. Ten of the eleven sectors of the SP500 closed higher overnight, with Technology stock faring the best, followed by Discretionary stocks. Utilities was the only sector to close lower on average.
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