Technically, the XJO has been stalling at its all-time high resistance around 7,150. If the XJO fails at this level, it will look to have formed a double-top pattern – after twice failing to break through the all-time high resistance. However, if the XJO breaks above 7,150 – the rally will look set to continue, but with no further levels of resistance, it is hard to say where a potential rally may stall. If the XJO does fail at this level, it will have to break through the short-term uptrend line around 7,090 before further falls will look likely. If that happens, the next key support level is some potential support around 7,000 index points. If the XJO falls and closes below the 7,000 support level – I imagine we will see further selling in our market, with 6,880 as the next key level.
US markets fell overnight, as fears of the economic impact of the coronavirus turned sentiment negative. The Dow closed 128.05 points lower (-0.44%) and the S&P 500 was down 12.92 points (-0.38%). Asian and European markets mostly closed lower as well.
US stocks fell as analysts warned that the coronavirus has the potential to impact earnings for the current and potentially future periods. The S&P 500 was down significantly at one point, with the index bouncing almost one percent from its intra-day lows. The index remains on an up-trend but appears to be firming up resistance around 3,385. The index fell to trade below the potential support level of 3,350 before starting to recover some lost ground. If 3,350 goes, the market will also be breaking its short-term uptrend, so we should see some further downwards movement. If the Index can rise above 3,385 – we should see further gains for the index.
XJO Implied Volatility was up 3.12% and closed at 12.394%. The US volatility was up 4.69% and closed at 15.56%.
US oil rose again – continuing its recovery.
Gold continued its rally, prices are back towards GFC level highs.
Iron ore rose again, prices remain extremely strong.
The Aussie dollar fell substantially again relative to the US dollar -with our dollar around decade lows.
Our market looks set to open flat despite negativity overseas. We are likely to be saved somewhat by the declines in the Australian dollar (which fell yesterday after poor jobs numbers) as well as the technical break on the XJO. Regardless, with valuations at record highs, and concerns mounting, risks to the downside are increasing. Despite this, commodity prices remain strong and with our dollar falling – our miners should get a boost. Company earnings season is ongoing, so make sure you check companies’ reporting calendars before any trades at the current time.
Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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