Overnight we saw willingness to hold current levels, but the move looked more like the start of a consolidation than the start of a move higher. Looking back to the past US elections the market tends to go sideways for months beforehand then tends to get volatile close in. So that means a pullback near the election. Being that we are around 7 weeks out from the election we could have just seen that pullback. From here it is likely to remain whippy.
Locally our market is not as overheated, so we still believe this is a buying opportunity, but as usual, timing is a day by day proposition. With many commodities still moving higher or holding highs, materials are a good bet after the recent pullbacks. Banks and real-estate are still uncertain for now and until we see Vic out of lockdown. Travel is pegged to border reopening and a successful vaccine. Staples pulled back as they were looking a bit expensive.
The XJO is set to have a flat open around 5900. This likely due to us pre-empting last night’s rally in the U.S during our session yesterday. We will likely need to see positive U.S futures during our session today in order to see a continued move higher. At this stage, U.S futures sit flat to green.
Technically, like the U.S we have held support so far. Our support is the bottom of the channel we have been trading in for the past couple of months. For us to break it, we likely need to see the U.S break theirs. A short-term downtrend line also exists creating a minor descending triangle. The strength and length of the support, and the juvenile downtrend line make it hard to expect a break either way, going against the typical expectation of a move with the underlying trend.
US shares rose fairly strongly overnight, which was the second green session in a row for the average US stock. Analysts ascribed the buying to vaccine progress and a weakening US dollar. Investors are also expecting more soothing words from the Federal Reserve when they meet later in the week, with any change to policy to be announced Thursday morning Australian time.
Every major sector pushed higher, with Healthcare, Technology, and Financials stocks rallying the hardest. The rally in technology was particularly of note for markets, with recent selling being largely led by the high-value US tech listings.