The XJO is expected to edge higher on open this morning following a night where the U.S was able to retake meek intraday losses to finish fairly flat. Their futures are also flat.
All is quiet on the western front as we wait for U.S jobs data tonight which will no doubt set the tone for trading next week. It could either vindicate the current move and spur it onwards to higher levels or give good cause for some profit taking. This would translate to our market re-testing the top of the range at roughly 7,850 to 7,900, and potentially breaking through to make fresh highs. Otherwise, there is plenty of room to head back towards the middle of the range and the comfort of the 50 day MA which comes in at roughly 7,750.
Beyond that, we have key levels of support roughly every 50 points as we move to the bottom of the range at roughly 7,550 to 7,500. It is, of course, hard to say what we will see, however, our market is likely reluctant to price in excessive gains without Iron ore stabilising. The banks remain expensive, and they have largely helped keep our market elevated in the face of a lamenting materials space. If we are indeed set to make fresh highs, it would be hard to suggest that the banks can continue to do the heavy lifting and would likely need to the materials to come online and pick up the slack. However, for the materials to do that, they would either have to ignore the falls in iron ore or want to see it stabilise first.
US Market
US shares closed flat overnight, with little change across the major indices. Prices initially traded lower but again bought back up late to finish unchanged. US stocks continued to hold near the all-time highs, with little change overnight. Markets were expected to be buoyed overnight by the European Central Bank cutting interest rates, but the response was muted. US Economic data overnight showed worse than expected jobs data, with lower labour productivity and higher jobless claims. Tonight we will see the full US jobs report, which is expected to show flat unemployment. For the time being, markets are likely to respond positively to weakening data, as it will solidify the likelihood of rate cuts.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Discretionary and Energy the best performers. Utilities stocks saw the most selling, followed by Industrials and Technology stocks.
Technically, the SP500 has broken above the previous all-time high and looks set to continue higher. Its hard to say where this movement may stall as these are level that have never been seen before. However, previous stalling points have been about one percent higher than the previous tops, which would point to roughly 5,400 index points. The previous high at 5,320 is now likely to act as support, and indeed, this level held as support overnight.
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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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