The Australian market should open strongly higher again today after another big jump from US shares overnight. Our XJO futures are pointing to a rise of around 70 points on open, which should see us open not too far below the key 7,000 point level. All major sectors of the US markets rose strongly overnight, and we are likely to see all of our major sectors fare well today as well. US markets are rising strongly at the moment because their Federal Reserve is now expected not to raise interest rates any further. This isn’t guaranteed, and further inflationary data could disrupt this narrative, but in the short-term investors are optimistic that US rates are peaking.

Our RBA is still expected to lift rates when they meet next week, but if the US central bank pauses rate rises, this could be the last rate rise from our RBA. This would obviously be a huge benefit to Australian shares, and could herald a longer-term turn around in our market. However, it is a delicate balance, because for inflation to slow, economic growth will likely have to slow, and should it slow to recessionary levels, this wouldn’t be great for the market. Still, in the short-term, investors are starting to become more enthused with the perceived direction of monetary policy.

Technically, our XJO now looks to have clearly held support around 6,800 index points. We now look technically bullish in the short-term, up to potential resistance levels around 7,000 index points. Our index remains in a longer-term downtrend, with lower peaks and troughs, and we would have to close above the previous peak at 7,100 before a change in trend will look likely.

US Markets

US shares rocketed higher overnight, with each of the three major indices finishing strongly in the green. Prices continued higher following yesterday’s Federal Reserve meeting, with many taking the view that the Fed is finishing with interest rate rises. US economic data was also good for the market overnight, with labor costs lower than expected, while productivity rose. Tonight we will see the full US jobs report, which will also be important in the interest rate/inflation narrative. Ideally, investors want unemployment to start rising slowly, as it could be a sign that inflation is coming down. Overall, though, with the shift in sentiment from the Federal Reserve, markets look to be shifting higher as well.

Every major sector of the SP500 closed higher overnight, with Energy the strongest performer, followed by Real Estate, Financials, and Dictionary. All major sectors closed firmly higher however.

Technically, the SP500 is now looking bullish after bouncing off support at the 4,100-point level. Overall, the index remains in a longer-term downtrend, but after setting a new trough, we will now be looking for a peak. Its hard to say where the may occur, with a potential resistance line at 4,330, and then 4,385 if that breaks.

Want to learn how to trade?

The team at TradersCircle/Emerald Financial have released a free online stock market education course, click here to enrol and get started.