The XJO reversed an early sell-off yesterday closing flat at 6,735. The market is on a short term counter-trend approaching the longer-term uptrend line around 6,660. We saw a strong reversal signal on the XJO yesterday, if we have a strong bullish signal today and break 6,750 the market will look bullish again. To the upside, there is a number of resistance levels on the way back to the all-time high resistance at 6,875. If the XJO does break above 6,875, there are no previous levels of resistance so its hard to say where it might head if it breaks. The next target to the downside 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.
Bega Cheese Ltd (BGA) slumped -9.3%, after the Company released an update on the impact that bushfires are having on its operations, noting several of its suppliers around Bega valley have been impacted by bushfires. Evolution Mining Ltd (EVN) was up +6.8%, after the bullion surged to its highest level in nearly six years as investors fled riskier assets amid rising tensions between Iran and the U.S.
US stocks fell initially but rebounded to close in the green, The Dow closed 68.5 points higher (0.24%) and the S&P 500 was up 11.43 points (0.35%). Most European and Asian markets closed lower.
US markets recovered a little after Friday’s US drone strike in Iraq shocked markets, At this stage, we haven’t seen any real retaliation from Iran which helped the US market recover overnight. Furthermore, China has also confirmed that they will sign the phase one deal in a ceremony on the 15th of Jan. The S&P 500 continues to edge sideways just below the all-time highs resistance at around 3,257. 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. At this stage markets will remain a little on edge this week as we could still see some retaliation from Iran against the US.
XJO Implied Volatility was up 3.20% and closed at 13.483. The US volatility fell -10.51% and closed at 12.47%.
Oil pulled back a little but is still on the uptrend. Oil jumped with the drone strike and the fear of further military escalation over the weekend.
Gold eased after breaking into a yearly high.
Iron ore continues to edge closer to $100.
The Aussie dollar failed to hold above $70 US but hasn’t confirmed bearish yet.
Today’s trading: In Australia, data on ANZ job advertisements to be published. In China, data on foreign reserves is anticipated. In Japan, we get data on monetary base, PMI composite and PMI services.
As long as things with Iran don’t escalate further markets will likely turn their focus on the US-China trade deal signing on the 15th of Jan. We are starting to see a slow recovery in metals with Aluminium and Copper pushing into uptrends. With Iron Ore holding high we expect Miners to continue to edge higher or go sideways. Banks seem to be widely bottoming out so it will be interesting to see if the take a rise early this year. The Banks really have the ability to see the XJO into all-time highs if we see a recovery. The US reporting season will kick off on Monday with J.P. Morgan, Citigroup and Wells Fargo & CO.