The XJO sold off yesterday much stronger than other world markets. The disconnect could be partly a reaction to the higher AUD and 10-year Australian bond yield increasing. This is a signal that rates made stay on hold for a little while longer. Technically the XJO is now in a short term uptrend and is testing the uptrend line and support at 6,600. If it holds, 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 a little overbought. With the Futures up slightly we are likely to see a fairly flat to higher day.
US markets continue to consolidate. The Dow closed 73.92 points higher (0.28%) and the S&P 500 was up 0.96 points (0.03%).Most other major markets closed mixed.
The S&P 500 reversed an early sell-off to close almost 1 point higher. Market overall continues to stall as momentum from positive news on trades starts to wear out and investors await the ECB and FED announcements. Thursday night is lining up to be a big one with US CPI which will give us a hint on what the fed might do next week. The ECB will also announce on monetary policy. Europe’s interest rates are zero and the deposit rate is now going into the minus, they are expecting the deposit rate to go down to 0.05% as well as the potential addition of some more stimulus measures. Otherwise, things remain 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 was up 0.78% and closed at 12.925%. The US volatility fell 8.47% and closed at 15%.
Crude was flat overnight but has been consolidating between $60US and $50US a barrel.
Gold continues to pull back and broke below $1,500 US support.
Iron Ore broke back above 90.00 US and continues to climb.
The Aussie dollar pushed higher and is holding above 68.50 US cents.
It will be interesting to see if central banks will react this month or wait to see the outcome of trade negotiations in October. The FED has recently commented that inflation is a little bit under target but other economic indicators are still fairly good. They also noted trade uncertainty and global growth was a large concern and they would do what it takes to maintain the current path in the US. More importantly, they have been clear that it is not the start of a rate-cutting cycle. This is becoming a bit of a double-edged sword as if China and the US continue to nut out a deal we may not need the FED to cut rates.