Weak commodities and a (somewhat) hawkish RBA

The XJO is expected to open lower this morning following a pullback in the U.S last night. The past four sessions in the U.S before last night, their intraday selling had been met by buying to finish relatively flat. Last night however, the losses stuck and out market will translate this to an open near 7,200.

U.S futures are in the green, and their move last night didn’t make new lows, so our market may crawl back some of the opening losses today. This would also keep in line with the unusual indecisiveness we have seen from markets recently. Furthermore, 7,200 is a support level where the 50 day MA comes in, and thus, even if losses also stick today for our market, it is hard to see them extending beyond these supports.

We will need to see if the move last night in the U.S was the beginning of a move lower, or if it will be met with more indecisiveness before we can suggest where are market is going to from here.

US Markets

US shares closed lower overnight, with each of the three major indices finishing in the red. This occurred with slightly weaker than expected US retail sales, while industrial production came in stronger than expected. Additionally, there was a build-up in US oil inventories, which suggests more oil is being extracted than consumed in the US. Causing additional worries to investors is the rapidly approaching US government debt ceiling, with US lawmakers currently negotiating its extension, as this ceiling approaches without resolution, expect to see more volatility in US markets.

Nine of the eleven sector groups of the SP500 closed lower overnight, with strong selling seen in Energy, Real estate, and Materials stocks. Communications and Technology stocks were the only ones to close higher on average.

Despite the overnight selling, the SP500 remains in in a broad sideways range, which it has held for some time. This is above the 4,050 as a support level, but below the 4,170-resistance level. Its not at all clear which way the market wants to break, but its hard to see a break to the upside without some positive news.

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