Overnight the S&P500 edged out a gain but still held below the all-time high, the Nasdaq closed slightly in the red. Metals were the standout overnight with Silver up over 4%, Gold up 1.57%, and Copper up 1.60%. Recovery stock led the move higher in markets overnight, Energy was the strongest sector after rebounded Friday’s pullback.
As we move more and more into May, we will continue to ask the big question on if we will see some form of correction. More times than not, May is a fairly weak month. What that means to me this year is that another move higher is likely and then for the market to give that backup and some. I will be leaning on technical signals to provide proof that this is playing out before placing any trades. In saying that I will also be a little more cautious over the next few months and close trades quickly if the markets look likely to pull back.
We will see the RBA meet today on Monetary Policy and will announce at 2:30 pm. They will unlikely make any changes. Especially ahead of the Australian Budget next week. The Treasurer will deliver the 2021-22 Federal Budget at approximately 7.30 pm (AEST) on Tuesday 11 May 2021. Our market will not like it if the government takes a strong stance on balancing the budget whilst most of the world is in a stimulatory phase.
The XJO is expected to have a meek rise on open this morning, following similar leads from the U.S overnight. Indeed, the U.S failed once again to hold highs, and the lack of conviction has passed to our market.
We have the cash rate decision today at 2:30 (AEST) from the RBA. It is of course expected to remain unchanged, but as usual the market will be instead focusing its attention on the forward guidance Lowe sets in his statements. Economic growth has recovered well, but inflation has remained worse than expected, and it is common knowledge the RBA will hold rates around here whilst that remains the case.
Despite the import of today’s meeting, it is likely to have little to no effect on trading in the short term; our movements are still largely dictated by what happens, and what is expected to happen (shown by their futures) in the U.S. With the U.S consolidating at the top of the range, expect us to follow suit until another run occurs either way. A break of all-time highs in the U.S has proven time and time again to have little effect on our short-term trading unless our market has a strong reason to believe that the run is likely to continue.
US shares closed higher overnight, though weakness in tech stocks caused markets to pull off their highs. US shares are starting to look a bit toppy at current levels after a long period of solid gains; but an eventual sell-off usually takes longer than expected to arrive.
In economic data, we saw US manufacturing PMIs come in lower than expected, though manufacturing prices were stronger than expected. Oil & Gas and Materials stocks were the strongest performers overnight, while Healthcare stocks also fared particularly well. Technology and Consumer Discretionary stocks fared the worst. This is the last week of US company earnings reporting, with this season having performed extremely well.
- Nasdaq pulls back, with selling in Tech, Discretionary, and Communication Services - May 5, 2021
- Markets continue to consolidate at top of the range - May 4, 2021
- US markets break higher again but with low momentum - April 30, 2021