The XJO is expected to edge higher on open this morning. The U.S had a decent move higher overnight, but we led them yesterday with our own relatively strong move.

With U.S CPI on Wednesday night, coupled with flat to negative U.S futures this morning, our market is likely not committing either way for now.

Yesterday, it was reassuring to see our market retake early session losses and bounce intraday from 7,150 to finish in the green. 7,200 is likely the next resistance with 7,250 and the convergence of key MAs the next major level after that. Otherwise, 7150 and 7,100 are the next key levels of support we would expect to hold at least into Wednesday night.

Ultimately, it is hard to know how the CPI will come in, and more importantly, how markets will react. However, recently the U.S economy has largely shown it is cooling, so it seems more likely that we see a positive U.S to finish off the week – which will hopefully translate to gains in our own market. We have unemployment data on Thursday which ads another factor.

Australian Outlook

US shares closed higher overnight, with each of the three major indices finishing in the green. The Tech-Heavy NASDAQ had the strongest showing, while the more value-based DOW JONES saw the least buying. There was a lack of major US economic data overnight, so prices instead continued their bullish momentum from Friday. Tonight is also relatively quiet for US data, but tomorrow night the reporting really heats up, with US CPI (inflation) data for August. Inflation is expected to rise further at this reading, which is not what markets will want to see. There is a chance that we see some volatility around this event, particularly if the reading is stronger than expected. Should CPI come in strong, US investors will likely start to price in another interest rate rise, which could lead to selling in shares.

Nine of the eleven sector groups of the SP500 closed higher overnight, with Discretionary stocks the stronger performers, followed by Communications shares. Energy stocks saw the most selling.

Technically, the SP500 rose off the 4,450 support level, which it tested on Thursday’s and Friday’s sessions. The index now looks bullish towards towards the resistance at 4,525. Should the index break above 4,525, the upside target would be 4,600. Should the index break below the 4,450 support, we would expect selling back towards the support at 4,350.

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