The XJO is expected to open flat this morning. The U.S was closed last night, however their futures closed in the red which our market is surprisingly not pricing in at this stage. If their futures remain flat to red during our session today, we will likely follow suit.
Indeed, yesterday’s rally was also surprising considering it also followed a mild pullback in the U.S on Friday. Perhaps we are trying to play some catch up. We stalled at key resistance which comes in at roughly 7,300. Yesterday’s move also confirmed the break of the downtrend line, and very likely the downtrend itself as we are no longer making lower peaks. If we manage to push through from here, then 7,350 to 7,400 remains the next key level and the recent highs for our market that we started falling from in April.
Technical indicators like key moving averages and the short-term stochastic are putting our market into overbought territory (albeit midly), and so it is reasonable to expect some profit taking soon – especially when we consider the dark mood our market has been in the past moth or so. Again, this will likely be triggered by some selling or consolidation in the U.S.
This morning we have our RBA minutes released from their last meeting which may help the market further understand how our RBA feels about the current inflation and interest rate environment. It is hard to say whether this will have an immediate effect on our session today, but there is no greater market sensitive information than that of price data and monetary policy.
US Markets
US shares were closed overnight for the Juneteenth public holiday. US futures did closed moderately lower however, after selling in European markets.
Technically, the SP500 remains on a strong uptrend at the moment, with prices powering higher. The index may have found some resistance around 4,450 on Friday however, so this level will have to break for further gains to look likely. Should some profit taking come in and lead to a pullback, the recently broken 4,300 resistance level may act as support on a downside move.
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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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