The XJO finished lower yesterday despite positive leads and futures. Technically, our major index is in the point of an ascending triangle pattern, between resistance at 6,700, and a 3-week uptrend line. If the XJO can break through 6,700, the next targets will likely be the next level at 6,750, and the all-time highest close of 6,851 after that. If the XJO breaks the up-trend line, we could see a move back towards the longer-term uptrend line around 6,550 – 6,600. Our market is trying to weigh up leads from the US, extremely low (and likely to fall further) interest rates, weakening economic fundamentals, and historically high share valuations as it struggles for direction.
A2 Milk Co Ltd (A2M) declined -3.8%, following a broker note from City Bank citing expectations of a decline in margins beyond FY20, by -131bps to 27% amid quantum of investment required by the Company for building share in key markets.
US markets held fairly flat ahead of the Fed interest rate decision. The Dow closed 36.28 points higher (0.13%) and the S&P 500 was up 1.03 points (0.03%).Most other major markets were also flat.
The US Federal Treasury Reserve cut interest rates overnight, lowering their cash rate to 1.75% in a widely expected move. The S&P 500 and Dow indexes, although predicting the move, traded flat ahead of the announcement. These major US indices have pushed back up towards their all-time highs, but despite the rate cuts, are struggling to post further gains from here. The S&P 500 did trade as much as 1 percent lower overnight as it struggled at a resistance level, before closing flat; it will have to break through resistance at 3,023 before further bullishness can be confirmed. If it does not break, the index will form a double top pattern and will likely look bearish.
XJO Implied Volatility was up 2.17% and closed at 12.518%. The US volatility fell 5.16% and closed at 13.95%.
Crude closed lower again overnight, but is still significantly higher than it was before the attack on the Saudi oil facility. It has broken the technical downtrend, but has been coming off for the past two sessions.
Gold is fell a little overnight, but is holding above the 1,500US support.
Iron Ore is struggling to push back above the $100 US level.
The Aussie dollar was fairly flat against the US overnight, despite the Fed rate cut.
A further rate cut in the world’s most important market was not enough to spur stock markets higher overnight, as traders and investors were hoping that the Fed would indicate that this was the start of many more cuts to come. Once again Fed Chair Jerome Powell indicated that this was not the start of an easing cycle, but rather just a small adjustment to policy. Around 30 percent of the voting members of the Fed saw no case for rate cuts, but despite this rates did move lower, and additionally, traders are pricing in another cut by year’s end.
Once again our market looks set to trade relatively flat and inside the point of its triangle today, keep an eye on domestic unemployment numbers which has the potential to cause some movement in our market; these numbers will be released at 11:30 AM.
Today’s trading. In Australia, data on employment change, unemployment rate and participation rate to be published. In the U.S. data on current account balance, initial jobless claims and continuing claims is anticipated.