The XJO seems to have run out of momentum after a strong move higher over the past few weeks. The channel has broken to form a short term uptrend with the next target around 6,750, the short term indicators are starting to look overbought. With the Futures down slightly we are likely to see a fairly flat day again today. We suspect that we could see the market grind higher in the short term, but remain a little cautious as the current move higher is on hopes that a trade deal can be achieved, but if any news around trade or interest rates disappoints market could fall strongly again.
US markets start to consolidate the Dow closed 38.05 points higher (0.14%) and the S&P 500 was down 0.28 points (-0.01%). Most other major markets also closed mixed.
The S&P 500 continues to stall as momentum from positive news on trades starts to wear out. We saw some economic data over the last week which has investors speculating whether China in doing another round of stimulus. The next big focus points for world markets will be central banks with the ECB Thursday night and the FED on the 18th September. Otherwise, things have gone quiet for now on trade as we await more news on how negotiations are going. Technically the S&P500 has stalled at the 2,980 resistance, if it breaks the next target is the all-time high at 3,027. To the downside, support is at 2,978.
XJO Implied Volatility fell 1.43% and closed at 12.824%. The US volatility fell 6.55% and closed at 15.27%.
Crude was up overnight but has been consolidating between $60US and $50US a barrel.
Gold has pulled back slightly after news of China and the US getting back to the negotiation table, targeting support at $1,500.
Iron Ore broke back above 90.00 US which seemed to be resistance.
The Aussie dollar pushed higher against the US and is back around 68.50 US cents.
With the trade war can kicked into October, markets have calmed and will start to focus on Central banks once again. Commodities are starting to recover which will help the materials sector, but the rising dollar could hold the move back a little. Otherwise, moves in the banks went a long way to holding markets higher yesterday. Energy will likely push higher again today after Oil prices jumped strongly.
ASX Update: Regis Resources Ltd (RRL) closed -6.9% lower, following a decline in price of the precious metal due to upbeat remarks from Fed Chairman Jerome Powell and improved risk appetite due to planned resumption of trade talks between the world’s two biggest economies. TPG Telecom Ltd (TPM) was up +5.5%, after a broker upgraded the stock to Neutral from Sell and raised the price target to A$6.6 from A$5.8.
Today’s trading. In Australia, data on NAB business conditions and confidence to be published. In the U.S., NFIB small business optimism data is anticipated. In China, we get CPI and PPI data and in Japan, money stock and machine tool orders data is to be published.