The XJO failed to hold onto gains yesterday after following strong leads early in the session. By the close, we saw most of the days move reversed closing only 16 points higher. The 6666 level has been a bit of a magnet for our market for some time and it seems to have become some resistance again. With the futures up today, we will likely see that level tested again. Technically the XJO is now in a short term uptrend and is testing the uptrend line and support at 6,600. If it holds, we could see the XJO go back to around 6,750. If it breaks, 6,400 is the next key support level. The short term indicators are looking overbought.
US markets continue to edge higher, the Dow closed 45.41 points higher (0.17%) and the S&P 500 was up 8.64 points (0.29%). Most other major markets also closed higher.
The S&P 500 pushed a couple of points shy of the all-time high at 3027 overnight but pulled back to form a Doji pattern. This is a sign of uncertainty at the all-time high resistance, if a bearish signal is shown tonight it will confirm a reversal pattern. Markets held highs as the ECB acts to continue to stimulate. Mario Draghi pledged indefinite stimulus and cut deposit rates to minus .50 percent. This has now put further pressure on the FED to do something next week as Trump continues to lash out. Overnight we saw a mixed CPI reading in the US with Core CPI coming in stronger than expected but CPI overall was down slightly. We have seen signs of progress in regards to the US and China relationship as both sides show some good faith with the US delaying some tariffs and China excluding a select number of products from the tariff list.
XJO Implied Volatility was up 2.22% and closed at 12.942. The US volatility fell -6.89% and closed at 14.22%.
Crude was down overnight but has been consolidating between $60US and $50US a barrel.
Gold is holding at the 1,500US support.
Iron Ore broke back above 90.00US and continues to climb.
The Aussie dollar pushed higher and is holding above 68.50US.
Markets love the word stimulus but continued stimulus sounds even better. Well, that’s for European markets. For the US, unless the FED goes down the same path, Trump is seeing it as a competitive advantage. So this will see huge pressure put onto the FED to do something. Employment is doing well in the US, but if they don’t cut rates markets will likely pull back strongly so they will likely have to cut rates to keep prices stable. So things are starting to line up for the US to continue to run. The big question will remain, can the US and China come to a deal without things escalating further? Locally we expect another rate cut from the RBA in the next few months especially if the FED cuts next week.
ASX Update: Dominos Pizza Enterprise Ltd (DMP) was up +3.9%, after a broker upgraded the price target on the stock by +15% to A$60. Janus Henderson Group (JHG) closed +3.2% higher, after the Company appointed Donna Crawford as head of operations for Australia. Whitehaven Coal Ltd (WHC) was down -3.4%, after a broker downgraded the stock to Hold from Buy.
Today’s trading. In the U.S., data on import price index and retail sales to be published. In Japan, data on industrial production and capacity utilization is anticipated.
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