It was a bit of a messy market overnight in the US, Energy and Materials finished in the green with most other sectors in the red. The Nasdaq has almost hit correction territory last week and then took off on Friday as many investors come in to buy the dip. This came into play as well last night with the Nasdaq reversing most of the early selling. The SP500 also closed very close to their highs after reversing an early sell down.
Both the S&P500 and Nasdaq are looking bullish after finding support and breaking the counter trend line. Locally the XJO is likely to hold the key 7,000 level. We have also seen strong selling in the crypto space and with the bond market quiet, we are likely to see the stock market continue to perform well.
Iron Ore rebounded overnight after the Dalian September futures contract tested the 1200 yuan level. Yesterday we saw them flirt with this level all day but late buying last night saw it close at 1236. Iron Ore port prices were up +4.3% to $US217.77 a tonne
Metals in general were also up overnight. Copper future are looking bullish again after testing the uptrend line. Most base metals were higher. Crude also jumped, these are all strong signs that value stocks are still in favour.
The mood in the markets still seem rather bullish, Value should continue to outperform growth in the near term. Growth stocks should also catch a bid though as many traders come in and buy the correction. Just remember it is common to see bearish to sideways in May then a recovery into the June and August reporting seasons. So this is a good time to start looking at Bull Put strategies.
The XJO is expected to open flat this morning, following similar lacklustre moves overnight in the U.S. Equally, their futures sit flat, not giving us any indication as to how our market might move today. We will likely take lead from their move and how Asia performs.
The last couple of sessions continue to show how the bulls and bears are fighting for the short-term direction for our market. The medium-term bullish outlook is contending with shorter term worries underlined by an overheated market.
Regardless, at this stage it seems the falls have ceased. We have a key level of support at 7000 that we should continue to hold, especially considering this is roughly where the broad uptrend line comes in. In addition, our short-term stochastics show an oversold market that is trying to turn. We face considerable resistance at 7100 so we may be in for another round of consolidation that could last anywhere from a week to a month.
US shares closed slightly lower overnight as they took pause after two days of buying. There was little major information to send the index in either direction, and so shares drifted lower to start the overnight session, before rising late to close nearly flat. US economic data from overnight showed slightly better than expected manufacturing data.
Traders and investors continue to be nervous that high expected inflation could lead to a lift in interest rates and this hypothesis will receive a test tonight in the form of the Federal Reserve’s meeting minutes, which will provide more detail on the outlook for interest rates. Communications and Tech stocks were the weakest performers overnight, while Materials, Energy, and Discretionary all rose strongly.
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