The XJO is expected to open higher this morning following a small rise in the U.S overnight. We are expected to open near 7,650, retaking much of the past couple of days losses. The recent sell down we have seen was pre-emptive, and largely led by the materials. With the U.S once again tracking sidewards last night, and not selling off in the face of extended gains, our market feels comfortable move back towards the recent highs.
However, U.S futures have edged into the red, and if they remain so by open, we could either see a softer open, or one where most of the day’s bullish move is priced in. Furthermore, the RBA wasn’t exactly reassuring in their statement yesterday. Though they kept the stance of being data dependent, they finished off the usual messaging with a small warning that rate hikes aren’t off the table. This could be seen as a message to keep everyone inline, and to manage expectations now in case the future does indeed call for another hike. It certainly wasn’t the dovish tone the market wanted, but it seems to have shrugged it off at this stage.
Roughly 7,700 remains the key level of resistance that we have been grinding along. With the recent, albeit marginal pullback we have seen over the past couple of days, short-term indicators have moved the market out of overbought territory. It has also established 7,550 as the interim support. With the strength this morning, our market will once again be in territory where we could easily see further highs. We will of course need to see the U.S rally to do so.
Finally, its worth noting that much of the strength in the U.S has been driven by their major companies and tech. This still flows into our market, but in a less impactful way. We are also nearing our reporting season, and so we could see continued consolidation for the XJO as focus narrows down to individual companies rather than the index as a whole.
US shares closed slightly higher overnight, in a session of fairly small movement. There was also a lack of US economic data overnight, so a lack of movement shouldn’t be too unsurprising. Company earnings reporting from the largest stocks continues to look strong, with Spotify and Palantir both rising after better than expected results. However, mega-cap drugmaker Eli Lilly closed slightly lower after its results. Sentiment was also boosted by a US government treasury auction overnight, which received strong support.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Materials, Real Estate, and Healthcare stocks performing well. Technology and Communications stocks moved lower.
Though the SP500 was stronger overnight, it was unable to break above the all-time high, which may be forming a resistance level; this is friday’s peak of roughly 4,960, which is the mark to beat for further gains to look likely. Should the index fall from here, the recent trough at 4,850 will need to break before further selling looks likely.
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