The XJO is expected to open flat this morning following another indecisive night of trading in the U.S which saw their market retake intraday losses to finish mildly in the red. Their futures are flat.

Yesterday our market broke support at around 7,450, driven lower by negative U.S futures. We settled on roughly 7,400 key support, and showed a clear willingness to hold it with a small recovery into the close. Despite the U.S session last night not playing out as grim as their futures indicated yesterday, our market is no mood to retake some of the extended losses. It seems likely we will continue this general malaise, which is starting to form a short-term downtrend, until the U.S can prove that it is happy to retest if not break through their all-time highs.

Yesterday we saw selling largely across the board. The banks and other key sectors have been keeping our market elevated in the face of our miners selling down. However, yesterday the pressure became too much.

For our market to stabilise, we likely need to see the materials stabilise, which in turn means we need to see iron ore stabilise. Our materials index has sold off roughly 7.5% over the past two weeks, so it is no wonder our market disconnected from the U.S and had trouble holding support.

Our move to 7,400 puts us within arm’s reach of the underlying uptrend line which comes in at roughly 7,350 at this stage. Therefore, it seems reasonable, with a little more selling or sideward movement, we should meet it soon.

US Markets

US shares closed lower overnight, with prices whipping back and forth before finishing moderately lower. Prices drifted lower after Federal Reserve policymaker Christopher Waller suggested that near term interest rate cuts aren’t quite as likely as the market has predicted. This shouldn’t be too surprising, given recent US economic data has been more inflationary than expected. Bond yields jumped as a result. There was a lack of major US economic data overnight, though we will see some important US economic data tonight, with retail sales, and some industrial data. We also saw a resumption of the company earnings reporting overnight, with Morgan Stanley falling after their earnings results, while Goldman Sachs was flat. Overall, don’t be surprised to see further selling in US markets, as they will potentially start to reduce hopes of March rate cuts.

Of the eleven sector groups of the SP500, only Technology shares closed higher. Every other sector closed lower, with Utilities, Materials, and Energy stocks seeing the most selling.

Technically, the SP500 has stalled out around the all-time high resistance at 4,800 index points. Should that level continue to hold, we could see a double-top pattern form, which would be a bearish sign for the index. The first downside target for the index would be 4,700 and if that breaks, 4,600. Should the index surprisingly bounce from here, that 4,800 level would be the mark to beat before further gains look likely.

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