XJO set to test all time high with futures pointing to an open near 7615

US market pushed higher as many traders speculate that the US market is oversold and with many expecting a short-term rise. We saw green across the sectors except for energy which closed lower with commodities falling. Crude was down 5% to 103.02 US a barrel. Most other commodities also closed lower, Copper was off 2%, Gold and Silver down similar amounts, Agricultural futures also traded lower, with Corn trading lower for the first time in over a week.

Earnings were mostly mixed, but most stocks pushed higher after their report. The exception was Netflix which reported aftermarket and fell 25% in aftermarket trading despite earning beating expectations. News that Netflix lost 200,000 subscribers in the first quarter saw investors flee. The news also saw shares of streaming companies Disney, Roku, Warner Bros. Discovery and Paramount fall. Will this be enough to change sentiment toward buying Growth/Tech stocks into reporting?

Bond markets continue to sell off indicating pushing rate expectations higher and higher, indicating central banks may rise too quickly. There is much debate on whether the central bank’s intervention will solve the issue which seems to be more supply based. Demand has come back after much of the world has come out of Covid lockdowns, but there are still many supply disruptions that need fixing. Adding the War in Ukraine, lockdowns in China and now protests at Libya’s oil fields, markets still have a lot to digest.

The next FED meeting is on the 3-4th of May which is the same week as the RBA. The FED is expected to push rates up as much as 75 bases points. At this stage, the RBA is not likely to move rates on either side of the federal election as it could be portrayed as a political move. Also the RBA till now has not been anywhere near as hawkish as the FED. So locally the jury is still out on when the RBA will move.

Australian Outlook

The XJO is expected to rally on open this morning following a strong night in the U.S. The rally in the U.S is likely due to their market simply being oversold. There wasn’t much in the way of positive news bar some good building numbers overnight. Indeed, the IMF forecasted a slowdown in global economic growth thanks to Russia.

Our market has been looking for a reason to rally, only stagnating because the U.S has been falling. After such a strong night, our market should go on to test all-time highs this morning. With Netflix’s poor aftermarket report though, U.S futures have dipped into the red, which means we are unlikely to get through immediately even though the damage is isolated to one area.
Commodities remain strong. The IMF overnight upgraded forecasts for Australian growth thanks to this. Iron Ore is tracking sideward at the top of the range and coupled with the AUDUSD retreating to 74c our commodities should keep elevated. The financials should also at least hold ground with major banks’ reports and dividends around the corner.

Today will be the second attempt to get through all-time highs (we failed in early Jan). The last attempt saw as come smashing down following the intraday rebound, but this time around don’t be surprised if we meekly drift higher. There doesn’t seem to be anything that can really stop our market, and with the U.S near the bottom of their range and their market showing strong buying, its likely we do get through in the coming days or weeks. That being said, the market will be starting to look overbought by a few short and medium term metrics.

If we do see a pullback, the top of the recent consolidation range (which we will break this morning) at roughly 7,550 will be the first line of support. Following that, the bottom of the recent consolidation range at roughly 7,450 should also prove key support.

US Markets

US shares closed strongly higher overnight. Prices rose across the three major indices though after the market closed US futures dipped lower with Netflix falling 25 percent in after market trading following a disappointing earnings result. The massive gains overnight were a little surprising, but they do come at the end of some strong losses, so that could help explain the strength. Economic reporting overnight showed strong growth in US building permits and housing starts in March, which were each stronger than expected. Ten of the eleven sector groups of the SP500 closed higher overnight, with only energy stocks falling after strong selling in oil. Discretionary stocks fared the best, followed by Communications and Technology stocks.