The XJO is expected to open flat this morning despite a small pullback in the U.S on Friday. Their futures have edged into the green which is likely helping our market hold ground.
On Friday we finished the week relatively positive as we retraced from our intraday lows to finish marginally in the green. The intraday bounce confirmed our desire to hold key support at 7,280, and our resilience this morning further validates it.
Sentiment has broadly shifted for our market to be more instep with broader U.S commentary that we can achieve a soft landing. Despite strong jobs data both locally and overseas, it seems that a soft landing may still be possible for both economies. We have joined the party largely thanks to the last two inflation readings locally coming in softer than expected and an RBA that has been willing to hold off rate rises. Whether this gambit of stalling will pay off however is still yet to be seen, though at this stage it looks like we may be nearing peak rates sooner than what was believed through roughly June and some of July. Hopefully this Thursday night U.S CPI continues the trend, and the music can keep playing.
The SP500 is trading near key support at roughly 4,450. If they hold this level our market will likely hold 7,280. Don’t be surprised if things remain quiet or indecisive as we head into the U.S CPI reading. It would be surprising to see markets commit either way before then, however the U.S will continue its reporting season which could upset the balance. So far, their reporting season has been positive, but not stellar.
If 7,280 fails, then expect a move back to 7,250 to 7,200 depending on the strength of the falls. This is roughly where the 50, 100, and 200 day MAs have converged. These mark a point of comfort for our market in times of unease. Otherwise, if markets buy the recent dip (likely on the back of favourable U.S CPI and reporting) then 7,380 to 7,400 is the next key resistance. Remember, even if the market’s direction is triggered by a fundamental event, we tend to fall and rise to key levels of support and resistance – even if we blow through one or two first.
Aside from U.S CPI on Thursday night, there is not much else regarding data this week (aside from U.S reporting of course). Tomorrow, we have Westpac consumer confidence and NAB business confidence at 10:30am (AEST) and 11:30am respectively, but it should be largely a non-event for our market.
US Markets
US shares closed moderately lower again on Friday, with US share prices falling for the fourth consecutive session. Apple shares closed almost 5 percent lower after a disappointing earnings result, though this selling was offset by strength in Amazon, which jumped more than 8 percent after its earnings result. We also saw the release of the US Jobs report, which showed falling unemployment and rising wage growth, which may have spooked investors about a potential reacceleration of inflation. Also triggering renewed inflation worries will be the recent bounce in oil prices, which could trigger coming inflation data to look strong. The next US CPI reading comes out on Thursday night Australian time; until then, it is likely US markets continue to drift, perhaps back to their uptrend lines.
Nine of the eleven sector groups of the SP500 closed lower on Friday, with Utilities, Technology, and Staples stocks seeing the most selling. Discretionary stocks saw the most buying.
Technically the S&P500 is falling from the resistance level at 4,600 and looks like continuing the bearish move to the uptrend line. The potential downside targets for the move are the longer-term uptrend and the previous resistance which may now act as support – both of these lines currently sit around 4,450.
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Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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