Our market is set to open flat once again following another indecisive night in the U.S. For the past few days their market has retaken intraday losses to finish marginally in the green. Our market has translated this to our own sideward movement, and we should expect the same today. U.S futures are in the green which will help keep us elevated.
We have found comfort at the 50 day MA as we wait for further direction from the U.S. The current state of markets is very frustrating. It seems like we are always waiting for a piece of key macro-economic data (like CPI, employment etc) to move markets. The movements on the back of these releases have been short lived recently, meaning both our market and the U.S has spent a great deal of time tracking sideward. Our market has had more volatility compared to the U.S, but remains ultimately range bound. We have been implementing time decay strategies like Bear Calls, Bull Puts, and Iron Condors to keep our risk above the top of the range and/or below the bottom of the range. These are time decay strategies however, and as the name implies, takes time to pay off. They remain the best strategy for our market it seems.
We have local GDP data this morning at 11:30am AEST. It is expected to remain fairly flat, falling 0.3% from the same time last year, but steady at 0.2% from last quarter. This is a healthy number for markets that are seeking interest rate cuts and therefore an indication of a cooling economy. However, we don’t want to see these numbers move into the negative. Two consecutive quarters of negative GDP is our definition of a recession. The last time we got close to that was 2008. For today, we shouldn’t expect anything shocking and for our market to shift too much on the back of the release.
US Markets
US shares closed slightly higher overnight, with each of the three indices edging out a small gain. US economic data continued to come in a little weaker than expected overnight, with fewer than expected job openings and a build-up in oil inventories, though factory orders came in in-line with expectations. On the interest rate front, expectations are now for two US Fed rate cuts this year, with the first expected in September. These expected rate cuts continue to act as a carrot dangling in front of markets, helping to keep prices high. The moves overnight continued to mirror the past few sessions, with markets initially trading lower before rallying the in last 20 minutes of trade to close higher, causing one to wonder that if these late rallies cease, will we see markets roll over.
Six of the eleven sector groups of the SP500 closed higher overnight, with Real Estate and Staples the strongest performers. Materials stocks saw the most selling, followed by Energy stocks. Most other sectors were flat.
Technically, the SP500 is in a bit of no mans land below the all-time high resistance at 5,340 and the support at roughly 5,200-5,220. We will need to wait and see if the index breaks either of these levels before another directional move looks likely. Should it break higher, its hard to say where the move may end but gains are likely to be incremental. Should it break below 5,200, there is another level close by at 5,150.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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