Our XJO index pulled back yesterday, but held above the 5,000 point support level. We saw some extremely volatile moves yesterday afternoon which were a little hard to keep pace with – but we ended the session significantly lower – meaning our market may have preempted the overnight selling in the US. A break below 5,000 could indicate further downwards movement, while a close above the resistance at 5,300 could indicate further upwards movement. Our futures are indicating a stronger open this morning, but we will have to wait to see if this eventuates, with other markets expected to fall.
US stocks pulled back overnight, despite the US Government discussing a fourth stimulus package. The Dow closed 410.32 points lower (-1.84%) and the S&P 500 was down 42.06 points (-1.60%). European markets closed higher as well, Asian markets were mixed yesterday.
The US Government appears to want to stop the selling in markets at all costs, with a fourth stimulus package now being discussed; US President Trump is reportedly seeking a $2trn infrastructure based stimulus package. Still, markets are weighing up whether all this stimulus will outpace the economic damage done by the virus; given that is impossible to determine at the moment, there is still plenty of selling. Technically the S&P 500 index pulled back overnight and appears to be forming some resistance around 2600-2630. To the downside, there is some potential support at the 2,500 point level. The index is therefore trading in a fairly narrow channel, so a break of either of the resistance or support could indicate further directional movement.
XJO Implied Volatility 35.629%. The US volatility fell -6.61% and closed at 53.54%.
US oil stabilised overnight, prices remain very weak.
Gold dropped strongly overnight. Regardless, prices in Australian dollar terms (given the fall in the AUD) remain extremely strong.
Iron ore gained slightly overnight. Prices remain strong considering the economic situation, but they have come off their highs
The Aussie dollar fell against the US dollar overnight, prices remain fairly weak but have recovered a fair bit from the lows.
Its hard to say what will happen in our market today, our futures are indicating a higher open, but everywhere else seems to be selling. This could be because our market ‘jumped first’ yesterday, or it could be that our spread of the virus is slower than other nations. It could also be because our Australian dollar is weak (making our shares cheaper for overseas investors) and that the drop in the value of Australian shares in US dollar terms has outpaced most markets. Regardless, there is no guarantee that the futures will hold true and we could be looking at a lower market by the close.