The XJO is expected to edge higher on open this morning despite continued falls in the U.S. overnight. Their futures have edged into the green.

Our positive open is likely thanks to our two largest sectors, financials and materials, being in a good position to hold. The financials were up in the U.S overnight, and the materials should benefit from both a strong rally in iron ore and a low Australian dollar. Furthermore, the U.S has mainly been falling on tech. During the bull run, tech did most of the heavy lifting, which is not well represented in our market. Their market out paced ours during the bull run on the back of tech, so it seems reasonable that we don’t share in as much of the falls when they are led by the same sector. Finally, we seem to have found a strong level of support near 7,600 which we are happy to hold at the moment. This is the lowest level for our market since mid-February. The equivalent level for the SP500 is roughly 4,950, which is still just over one per cent away.

In the short-term, we should expect markets to stabilise and see a relief rally. Even though the pullback was well overdue, and in a broader sense, likely to continue, the nature of the market recently has been to whip around and find any reason to rally. We should expect this sentiment to linger for a while yet. In addition, short-term indicators now put us in oversold territory. 7,650 is the next key level of resistance, which is also where the 50 day MA comes in.

US Markets

US shares closed mostly lower overnight, with strong selling in the tech-heavy NASDAQ, while the SP500 saw moderate selling, and the DOW JONES was flat. US markets again headed lower with the selling continuing as investors wake up to the fact that rate cuts likely aren’t coming soon. Shares look very expensive at current interest rate levels. There was a lack of fresh US economic data overnight, though we did see a continuation of the company earnings reporting season, with practically all the large reporting companies overnight closing substantially lower after their results. Things have definitely taken a turn for the negative for US markets, and a strong bounce back doesn’t look likely just yet. That being said, a small respite should be expected in the coming sessions after four strong drops over the past four sessions.

Four of the eleven sector groups of the SP500 closed higher overnight, with Utilities the strongest performer, followed by Staples and Materials stocks. Technology stocks saw the most selling, followed by Real Estate stocks.

Technically, the SP500 continued below the next potential support at 5,050 index points. The index fell to the next major level at 5,000 points. Should the index continue lower, we look likely to see a move back to the 4,940 level, which was first reached around the start of the year. Should the index bounce back from here, it would have to first break above 5,050 for further gains to look likely.

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