Technically the XJO has been stalling around potential resistance of 6,875, which is the all-time highest level for the market. The market looks set to fall today to test the previous resistance around 6,775, which may act as support. If the XJO can break back below 6,775, we should see the XJO head back to the supports around 6,630-6,650, if those go, the next target to the downside would be some support at 6,500. We should see a large fall on open, but future moves will likely come down to US movements, the tone of the RBA today, and Australian GDP numbers tomorrow.
US markets fell after disappointing factory data and fresh concerns over trade. The Dow closed 268.37 points lower (-0.96%) and the S&P 500 was down 27.11 points (-0.86%). European markets were lower whilst Asian markets were higher yesterday.
President Trump reinstated levies on steel and aluminium from Argentina and Brazil, which in addition to the weak manufacturing data, caused US markets to sell-off. Despite the pull-back, the S&P 500 is still trading near all-time highs. There are no further levels of resistance to the upside for the S&P500, so it is hard to say where it might stall, although recent highs around 3,150 may act as resistance moving forward. If the S&P 500 breaks through support at 3,100 to the downside, there are additional potential levels of support at 3,050, and 3,020. If those levels break, 3000 is the next key level, if that goes we could start to see the index downtrend.
XJO Implied Volatility was up 1.86% and closed at 11.476. The US volatility was up 21.19% and closed at 14.91%.
US Crude bounced back somewhat but it was nothing in comparison to the falls seen on Friday.
Gold was fairly flat overnight despite the falls.
Iron ore bounced back a bit overnight.
The Aussie dollar rose fairly strongly against the US.
The Australian market looks set for a serious drop on open after weak leads overseas overnight. Our market appears quite fundamentally overvalued around these levels, so volatility up at the top of the range here should not be unexpected. Watch to see if the XJO breaks below 6,775, and also watch for the effect of the RBA decision at 2:30 PM (No change expected, but look for the tone of the accompanying statement). Our market will also likely see some movement around Australian GDP tomorrow, with most economists expecting a fairly modest 1.7% annualized growth rate.