The XJO is expected to edge lower on open this morning despite a small rise in the U.S overnight.

We are likely being cautious as we head into the pivotal RBA meeting today at 2:30pm (AEDT). In addition, U.S futures have edged into the red, and we are trading at resistance.

Yesterday we failed at 7,000, and this morning we should hold it. We have had a strong rally over the past five sessions since our lows, led by the U.S. This has put us not only at key resistance at 7,000 but also back at the broader downtrend line.

The market has largely priced in a rate rise today, however the focus will be more on the future guidance of monetary policy heading into 2024. The main driver of our market’s daily moves tends to be how the U.S traded overnight and how their futures perform during our session. However, our own local situation can create tail or head winds that exacerbate or act against U.S moves. If our market is unhappy with the RBA today, then we could exacerbate any U.S falls, or be rather muted in the face of U.S rises. In the immediate term, we may see some optimism or fear come into our market, however it would be hard to expect anything too major without taking lead from the U.S first.

If we do fail here, then 6,950 to 6,900 is the next key level of support. If the U.S remains positive and we push through, then 7,050 to 7,100 is the next clear target which is also where the 50 day MA comes in. At this stage, we would assume that the downtrend is still in play and the next broader move is back down to our lows.

US Markets

US shares closed slightly higher again overnight as the upwards momentum notably slowed. Prices struggled to advance and they could not get beyond Friday’s highs. Such a move should not have been unexpected, as after many days of sequential upwards movement, profit taking will naturally slow the gains. Regardless, US investors remain positive with the belief that interest rates are peaking and that the next interest rate move will be lower. We are likely to see US markets reestablish uptrends unless something disrupts this narrative. As always, economic data will be key and US investors currently want to see US economic data continue to slowly weaken, as it supports the ‘peak rate’ view.

Only five of the eleven sectors of the SP500 closed higher overnight, with Technology the strongest performer, followed by Healthcare. Energy and Real Estate stocks were the worst performers.

Technically the SP500 is slowing around some potential resistance at 4,385. The index will have to close above this level for further gains to look likely. The index remains on a longer-term downtrend and if it cannot reach 4,385 it will actually be setting a lower peak than that in mid-October. Should we see selling from here we would be looking for the index to set a higher trough than the 4,100 level of late October and this would point to a turnaround in the longer-term downtrend.

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