Technically, our XJO broke through the previous resistance around 7,150 to close at an all-time high last week. However, selling in overseas markets caused our market to reconsider its break to the upside and on Friday, we closed back below that level. The key level now to the downside is the short-term uptrend line that comes in around 7,100. If 7,100 breaks, we should see our index continue lower – the next key support level is some potential support around 7,000 index points. If the XJO falls and closes below the 7,000 support level – I imagine we will see further selling in our market, with 6,880 as the next key level.
US markets dropped again on Friday, falling for the second day in a row as viral uncertainty continued to plague markets. The Dow closed 227.57 points lower (-0.78%) and the S&P 500 was down 35.48 points (-1.05%). Asian and European markets mostly closed lower as well.
US stocks fell with the belief that there is increased downside risk to the global economy should the coronavirus persist. Of particular concern is that the virus is starting to spread outside of China and the disruption to supply chains from Chinese quarantines and shut-downs. The S&P 500 fell through the 3,350 support level and continued towards the next level at 3,320; this level was the high of the previous peak, so a hold of this level will likely indicate that the uptrend will continue. However, should the index finish lower again – it will look technically bearish and we could expect some further downwards movement.
XJO Implied Volatility was up 2.19% and closed at 12.671%. The US volatility was up 7.58% and closed at 15.56%.
US oil came back down.
Gold continued its meteoric ascent, prices are back towards GFC level highs.
Iron ore rose again, prices remain extremely strong despite forecasts that the virus would lead to lower demand for iron ore.
The Aussie dollar rose a little against US dollar – however, our dollar around decade lows.
Markets seem to be a lot more cautious about the virus at the moment. Its not just the threat to human health that concerns investors – but the worry that the measures taken to slow the spread of the virus will lead to negative economic outcomes. The weak unemployment numbers last week caused traders to increase bets on another RBA rate cut – with April now the expected month of action. We will have to watch the short-term uptrend on the XJO today to see if we are about to see a short-term change in trend. Reporting is ongoing at the moment, so make sure you check a company’s investor calendar before any trade at the present time.
Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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