With the US markets closed overnight there was not much activity to lead markets. European markets managed to edge out a gain after opening in the red.
US reporting is just starting, so far, the banks have beat earnings expectations. The banks fell on Friday, but that was already after some incredible moves higher. We will be watching the US banks closely this week when they reopen tonight. When they bottom out we could find another bank trade in our market as we tend to follow. The banks in the US late last year were given the green light to buy back shares again, with low-interest rates they will likely take up on this which tends to lead prices higher.
This week everyone will be watching the US Thursday as Joe Biden becomes President. The US is preparing for more rioting, if there is any real effect on the market it will be temporary. Markets will be just looking for more information on stimulus. Many are expecting more fiscal stimulus from the Democrats in the next few months.
The XJO is expected to fall on the open to near 6670 this morning. This is following negative leads from the U.S in both their Friday session and their futures this morning. Considering how things are looking right now, it is reasonable to expect a decent bearish today.
It seems once again our market is unwilling to push through 6750 or there abouts. On Friday we reversed our gains from that key level of resistance to finish in the red in clear defiance of any prospect of pushing through. Todays expected losses will confirm the bounce off that key level, keeping us in the tight channel we have traded in since roughly the start of December. There is interim support 6666 or there abouts – a number our market seems to hang around. The bottom of the channel though sits clearly around the 6600 level.
The consolidation at the top of the range may lead to a continuation pattern, or a reversal pattern. Which it will be will largely come down to how the U.S plays out in several key areas. Arguably the most important data coming from across the waters is their reporting season. Friday saw some of their major banks fall despite most beating expectations. This may simply be because the reports came following a good run already. Don’t be surprised if that affects our major banks in our following sessions.
US markets were closed for the Martin Luther King Jr public holiday. The US is in the midst of a company earnings reporting season and tonight we will see plenty of major companies report.
Markets are worried that share prices have become too elevated and this reporting season is therefore extremely important in determining whether valuations have advanced too far.