The strengthening of the Australian dollar helped our market lower yesterday. However, despite the AUD rising again, our market looks set to enjoy some of the strong gains that have helped global markets higher overnight. Our XJO is trading in a shallow uptrend, rising off the trend line and some support around 6,630 late last week. The XJO is currently stalled somewhere in the middle of the range of the past few months. To the upside, there are resistance levels around 6,775 and 6,875 after that. To the downside, there are moving averages around 6,700 that may act as support, following that is the medium term uptrend. If the uptrend breaks, 6,500 would be the target. If 6,500 breaks, we should see the index start to downtrend – something we are yet to see this year.
ALS Ltd (ALQ)was down -5.1%, following a broker downgrade to Sell from Neutral. Charter Hall Group (CHC) was up +4.7%, after the Group announced A$1.25bn of acquisitions including $840m investment in new managed partnership to acquire a 49% interest in $1.7bn portfolio of retail properties leased to BP Australia, and raised its FY20 post-tax operating EPS growth forecast to 30% from 18-20% on “significant acquisition activity”.
US markets closed higher with officials announcing that the US had reached terms of a deal with China, and that it awaited Trump’s sign-off. The Dow closed 220.75 points higher (0.79%) and the S&P 500 was up 26.94 points (0.86%).European were higher and Asian markets were mixed yesterday.
Treasury yields fell and equities rose as optimism around trade and confidence in lower-for-longer rates continued the bullish mix that has helped stocks to rise all year. The S&P 500 rose into and closed at fresh all-time highs, meaning there are no resistance levels to the upside and it is hard to say where it may stall. If the S&P 500 falls from here, there are potential levels of support at 3,150, 3,100, 3,050, and 3,020. If those levels break, 3000 is the next key level, if that goes we could start to see the index downtrend.
XJO Implied Volatility was up 2.77% and closed at 12.886%. The US volatility fell 12.48% and closed at 13.94%.
US Crude jumped higher.
Gold ticked lower.
Iron ore was again mixed with the spot market falling, but Chinese futures rising.
The Aussie dollar again rose against the US dollar.
Today’s trading. In Japan, data on industrial production, capacity utilization, Tankan large manufacturing and non-manufacturing index and Tankan large all industry capex to be published.
Optimism around trade could see global markets take another leg up, but our market will be held back somewhat by our rising dollar. We are also seeing some of the exit polls of the UK election starting to trickle in, with the final result likely known late today. The exit polls are suggesting a small conservative majority, which would likely lead to the completion of Brexit.
Markets are buoyed by the trade news but nothing is certain until the deal is signed – when and if it is, it should provide another boost to markets.
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