Energy, Financials, Materials gave a little back overnight as Tech edges higher. The move down last night looks more like some profit-taking rather than the start of something more. The FED minutes last night showed more bond-buying on the way. The stimulus message continues to help support markets despite weak economic data and COVID-19 lockdowns.
Tomorrow the US market will be closed for Thanksgiving. This means locally markets will likely have a few sideways days. At this stage, the Australian market is set to open slightly lower. All in all, markets are a little overheated at the moment so a small pullback here is welcomed. But the reasons we are here have not changed, with the likelihood of more US stimulus on its way.
Locally we are seeing a commitment to infrastructure spending from both a state and federal level. We will also see a lot of spending on incentivising people to travel around Australia. This spending Is designed to help lift the economy. Unfortunately, it does not bail out many companies that will either have already or will have to close their doors.
We must remain vigilant in the markets as many stocks are just moving on the flavour of the month or week. As we come into the February reporting, we will see the true position companies are in post-COVID-19. But until then let us enjoy the uptrend and get as much from it as we can before the next correction.
Australian Outlook
The XJO is expected to open slightly lower this morning on fairly subdued leads from overseas. U.S futures have edged higher, and if they remain positive during our session today, our market should remain flat or even positive.
Technically, 6666 seems to be a point like 6000 where our market likes to hang around. 6600 is the next key support and 6750 is the next key resistance.
The uptrend continues and today may simply be a breather. The market feels ripe for a pull back though, so remain cautiously optimistic in the short term. As we trade at 6666 and between key resistance and support, the pullback may instead come in the form of sideward movement – a fairly typical pattern for our market, especially at the top of the range and after a bull run.
The pressure will continue to come from a rise in the AUD as the USD continues to devalue, putting pressure on our miners and other key players.
Due to the Thanksgiving holiday we will have no leads from the U.S, except their futures. This means that our market tomorrow will likely be flat as we typically need permission from the U.S to rise. There is a good chance however, that due to the local positive news our market edges higher.
US Markets
US shares closed a little lower overnight, with investors taking a bit of a breather ahead of Thanksgiving tonight. Recent movements away from the more resilient industries and into the downtrodden ones reversed overnight. The most noteworthy news overnight was the large amount of economic data releases. US jobless claims, consumer sentiment, and GDP was all worse than expected. However, GDP did show quarterly growth of 33 percent in Q3 after a torrid Q2.
There was some positive data as well, with strong new home sales and a drawdown in US oil inventories. Technology stocks were the strongest performers overnight, while utilities also closed higher. Oil and gas stocks fared the worst, despite the drawdown in oil inventories; every other major sector was fairly flat. US markets will be closed tonight for Thanksgiving.
Tim Michaelides is the Head Trader at Emerald Financial Group.
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