The XJO will bounce on open today, reversing at least a little of yesterday’s falls. Technically the XJO is in a strong downtrend and breaking several key support levels. It settled just below the next key support at 6,500 – although it is set to open above this level this morning. Despite the likely rise today, the index is still looking rather bearish, and with the next trading day being a Monday (historically the XJO doesn’t like Mondays) there is still a strong chance we see further falls. If 6,500 breaks convincingly, 6,400 would be the next downside target.
Saracen Mineral Holdings (SAR)was up +4.1%, after bullion extended its gain as weaker than expected U.S. private payrolls data reinforced global economic slowdown fears and raised expectations of further monetary policy easing by the U.S. Federal Reserve.
US markets rebounded somewhat after weak economic data increased the expectations for further FED rate cuts. The Dow closed 122.42 points higher (0.47%) and the S&P 500 was up 23.02 points (0.80%). European and Asian markets were significantly lower yesterday, following the US leads from the night before.
US markets were over one percent lower again around the start of the session, and the weakest services PMI in 3 years looked set to send markets lower. However, soon bets started to increase for further FED rate cuts, and markets ticked back up. Technically, the S&P500 fell to the next levels of support around 2,850 overnight, before bouncing strongly. Despite this, the index is now in a downtrend after failing to break resistance at all-time highs, a move that has also created a double-top pattern. If 2,850 breaks, we could see the index retreat all the way back to the June lows around 2,750. To the upside, there is resistance around 2,940.
XJO Implied Volatility was up 11.22% and closed at 16.253%. The US volatility was flat and closed at 19.12%.
Crude was fairly flat overnight.
Gold rose a little bit again, holding above the $1,500 USD support level.
Iron ore is flat with Chinese markets closed for the National Day holiday.
The Aussie dollar rose back towards 67.5 US cents as traders placed bets the FED would cut rates further.
Whilst the weak US economic data continued overnight, markets actually rose – ostensibly due to the expectations of further FED rate cuts. Rate cuts are great for markets, but if weak data continues, markets will likely continue to fall. Keep in mind that valuations are still near record highs, so weakness should not be unexpected. The market is set to end the week on a positive note however, giving some respite to traders and investors who have just had to endure two of the roughest days this year.
Today’s trading. In Australia, retail sales data to be published. In the U.S., data on unemployment rate, trade balance and change in nonfarm payrolls is anticipated.
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