XJO to reverse yesterday’s gains

Our market is expected to give up most of yesterday’s gains on the back of strong falls from the U.S overnight. We are expected to open at 6200, a level we can expect to act as key support going forward if our market holds up.

We remain tide to overseas moves, but our local news is helping our market remain positive. We have curtailed the virus for now, where as the U.S is spreading it like wildfire. Our budget came through as positive stimulus for our suffering economy, where as the U.S is worried about future stimulus talks depending on who wins the election. These major differences may see our market hold up well against falls.

The break yesterday, and the expected falls today, verify that we are consolidating at the top of the range. This could lead to either a reversal pattern, with the break of 6200 being a trap, or continuation pattern where the market goes for another run having gotten its breath back. We await further indication.

Australian Outlook

With strong falls from the U.S last night, our market is expected to open near the 6200 level, giving up all of yesterday’s gains. U.S futures sit mildly in the green, and if they remain so during our session, will likely stem the bleeding. With the break of 6200, it would not be surprising to see it act as support going forward as this is often the case for major key levels. Regardless, we are consolidating at the top of the range, which can either turn into a reversal pattern, or a continuation pattern.

With the channel now broken, and 6200 as support, there is an expectation that we continue to see bullish movement in the medium term. On the other hand, if we see extended falls from here, perhaps due to election jitters, then the recent push through of 6200 was a false break. At this stage, as we consolidate, we await further indication.

US Markets

US stocks fell strongly overnight with the US political leaders still not agreeing to the long awaited fourth fiscal stimulus deal. It is now looking very unlikely that such a deal will occur ahead of the election. We also saw Fed members adding fuel to the fire overnight by suggesting that any recovery would slow without further fiscal spending. Earnings were again mostly positive overnight, but once again a strong result wasn’t necessarily enough to cause a share price rise; we saw IBM report largely better than expected, yet it fell off substantially on the night. Oil & Gas stocks were the worst performers, while Tech, Financials, and Healthcare stocks also fell strongly. Everything other major sector also closed some degree lower.