The XJO is expected to extend its falls again this morning following a pullback in the US overnight. Their futures are also heavily in the red, likely exacerbating our selldown.
Yesterday was an unusually large fall on open considering the little leads we got from the U.S the night prior. However at 11:30am AEST, our weighted CPI reading came in slightly higher than expected which caused our market to fret and selldown further. If we do not get inflation under control, the RBA could easily move back to a tightening cycle, which would likely tank our market – we are seeing the early signs of it now.
We should test key support at 7,600 on open this morning. If U.S futures remain starkly red during our session, our market may extend the losses and push through. The next key target is at the bottom of the recent channel down at 7,550 to 7,500. Beyond that, 7,400 and the 200 day MA is the next key level. This would also signal a break of a broad double top pattern.
US Markets
US shares closed lower overnight, with each of the three major indices closing in the red. The tech-heavy NASDAQ was again the best performer, while the DOW JONES saw the most selling. US markets have stalled up the top of their range, around all-time highs, with bond yields rising and with concerns that interest rates will remain higher for longer. At the same time, the economy is seen as slowing, with a big drop in the rate of economic growth between last year and this year. We will see an update on US economic growth tonight with the GDP release for the first quarter. This is the second reading for 1Q24 GDP, but markets will no doubt be placing close attention. Overall, with US markets stalling out at highs, and with prices extremely expensive, don’t be surprised to see a period of selling for US shares.
Technically, the SP500 fell back to the key support at 5,260, which was previously an all-time high resistance level. This level would have to break for further selling to look likely. Should the index close below 5,260, we could see a move back towards 5,150.
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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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