The XJO closed out the day slightly higher after a whippy session, once again it struggled to continue to push higher holding around the 6666 level. This 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 down today, we will likely see that level hold. Technically, the XJO is now in a short term uptrend and is trading in the edge of an ascending triangle between the uptrend line/support at 6,600 and resistance. If we break to the upside, 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.
ASX Equities Update: Bellamy’s Australia (BAL) surged +54.9%, following the news that China Mengniu Dairy Co. has agreed to buy the Company for A$1.5bn, representing a +59% premium to Friday’s closing price. Eclipx Group (ECX)was up +7.8%, after a broker upgraded its recommendation on the stock to Buy from Neutral and raised the price target to A$1.96 from A$1.56. Sims Metal Management (SGM) was down -13.3%, after the Company announced negative impact to 1H20 profits amid recent falls in ferrous and non-ferrous prices.
US markets closed lower, The Dow closed 142.7 points lower (-0.52%) and the S&P 500 was down 9.43 points (-0.31%). Most other major markets also closed lower.
The S&P 500 pulled back overnight but didn’t confirm a bearish signal. Markets seem to have run out of momentum at this stage ahead of the FED meeting Thursday morning. Sentiment weighed that growth on the global economy could slow further if Saudi Arabia doesn’t get oil production back up quickly. At this stage it isn’t clear how quickly they will get back to full capacity, originally they were expecting to get back up and running quickly but reports coming out are suggesting it could be weeks or even months. It is also unclear how much oil is in reserve globally. Initially, it was thought the attack was a drone strike coming from Yemen, but more evidence suggests it could be a missile from Iran.
Otherwise, it is all eyes on the FED meeting Thursday morning as they are widely expected to cut rates. If they don’t, we will likely see markets come off a bit as they seem to be addicted to easing monetary policy and stimulus.
XJO Implied Volatility fell -4.73% and closed at 12.357. The US volatility was up 3.07% and closed at 14.67%.
Crude has become very volatile after the attack on a Saudi Oil facility disrupting 5% of the global oil supply.
Gold is holding above the 1,500US support.
Iron Ore struggles to push back above the $100US level.
The Aussie dollar pushed higher and is holding above 68.50US.
Energy stocks will likely hold the market up today after Crude held strong overnight. Banks seem a little overbought but seem to be waiting for the FED. Materials will likely be mixed as Iron Ore and base metals fell off but Oil could see BHP hold higher. The XJO looks a bit overdue for a pullback short term, but could just sit here and wait for a lead from the FED.
Today’s trading: RBA minutes from its September policy meeting is to be released. In the U.S. data on monthly industrial production is anticipated.