US markets at one stage broke resistance, but pulled back below, showing signs that we will continue to see sideways movement rather than a strong push into all-time highs. Yesterday the US debate which aired during local market hours saw US futures whip from green into red which saw our market fall heavily throughout the afternoon. This just shows how whippy and volatile things are going to be over the next month.
Overnight we saw US banks pass the FED test, with the FED extending restrictions on dividends and share buybacks. These measures are to ensure the banks are using the low-interest rates and FED payouts to help customers rather than help themselves.
Locally, markets seemed to have overreacted to the downside, we could see some catchup today with strong leads overnight. Expect sentiment to be mixed this month as there is a lot to come. We have the Australian Federal budget next week, US quarterly reporting kicking off in a few weeks. US elections early Nov, and local bank reporting early November as well. With so much for our market to digest we expect to stay sideways yet volatile.
Following positive leads from the U.S and their futures this morning, our market is set to have a modestly strong open near 5860. If the U.S futures remain positive through our session today, we should be able to hold on to these gains, if not collect more.
The positive move for our market today will also help reverse much of yesterday’s over reaction. The previous night the U.S fell marginally, but during our session yesterday we saw a huge reversal from their futures from green to deep red. This caused our market to sell off excessively. The flip was most certainly on the back of the first U.S presidential debate. With the uncertainty our market fell by more than our fair share, and with positive leads overnight and from their futures today, it is likely our market will read yesterday’s move is unnecessary and play make up. Though it is unlikely we reverse all the losses in one session.
Ultimately, we are still trading in two broader conflicting patterns: The longer-term channel between our post fall highs at 6200 and the key support at roughly 5750, and the short term downtrend we have seen play out since late August. Yesterday’s harsh move down was a break of a pennant, so we likely expect further bearish movement. On the other hand, we recently bounced form the bottom of the channel, so eventually we should head back to 6200. The next week or so should give us more indication.
Overnight US shares managed to rise fairly strongly. This was a very surprising move given the volatility their futures experienced after the presidential candidate debate yesterday, with their futures falling from around one percent higher to around one percent lower in a very short space of time. While the S&P 500 index did close firmly higher, it finished almost a percent off the intra-day high. Hopes for a fourth stimulus deal helped shares rise, with shares paring their gains after officials warned that a deal might not come too soon. Every major sector closed higher except for Oil & Gas, which continues to languish despite stability in oil prices.