The XJO is expected to open flat to higher this morning despite a continued rally in the U.S overnight. Their futures have edged into the red, which may be the reason behind our muted opening. Our market could also simply be cautious that the rally may soon meet some healthy profit taking.
Yesterday we managed to get through resistance at 7,200, but 7,250 is only around the corner which is both the next level of resistance and where roughly the 50 day MA comes in. Our market also tried to clear the tentative downtrend line, though it is hard to say if we a clear of it yet or not. It may give our market another reason to fall today, especially if U.S futures move harder into the red.
Overall, our market is looking overbought in the short-term with six days of uninterrupted gains. Today we have the RBA cash rate decision at 2:30. It is expected to increase by 15 basis points, or to be put on hold. Our market will largely be looking for forward guidance from Lowe. Typically, we expect these events to not have a kneejerk effect on our market, but it is something to be mindful of.
US Markets
US shares closed slightly higher on average overnight, with the DOW JONES and S&P500 finishing slightly in the green, while the tech-heavy NASDAQ index finished slightly in the red. Prices opened lower before grinding throughout the session to finish around the daily highs. US economic news overnight was mostly negative, with the ISM manufacturing data coming in weaker than expected. Negative data isn’t super negative for the market at the moment however, as it furthers the narrative that interest rates are nearing their peak. It’s a shortened weak for US markets and there isn’t a whole lot of major economic news to come out, so don’t be surprised to see a continued drift higher in US markets.
Energy stocks were the best performers by far in US markets, after huge jumps in the oil price led by OPEC production cuts. Healthcare stocks also fared well. Real Estate and Discretionary stocks were the weakest performers overnight.
The S&P500 recently broke above the potential resistance levels at 4,080 and 4,100 and is now continuing higher. The index is on an upwards movement and now looks like reaching the yearly high peak of around 4,200 index points. Should 4,200 break, the next upside target would be the 4,300 index points. Should the index fall from here, the uptrend line, which currently sits around 4,040, would be the likely downside target.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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