Our XJO showed incredible resilience yesterday by rising in the face of weakness everywhere else. Much of this is likely due to our lower infection rates than many large countries overseas, but some of it is also perhaps that a lot of the ‘talking heads’ of our market have recently encouraged buying. We will however follow the overseas markets lower today, but perhaps not to the same extent that they have fallen. Technically, our XJO is holding below some resistance at 5,300, if we can close above that level, we could see our index move back towards some potential support/resistance at approximately 5,600. If the XJO breaks to the downside, there is some potential support at the key 5,000 level – a close below that could see us head back to recent lows.
US fell for the second day in a row overnight, as US President Donald Trump warned of a ‘painful’ period ahead. The Dow closed 973.65 points lower (-4.44%) and the S&P 500 was down 114.09 points (-4.41%). European and Asian markets also fell yesterday and overnight.
US officials came out with sobering warnings overnight about how things could continue to get worse before they get better. In New York, Governor Cuomo warned that their models were showing that their outbreak may not peak until the end of April, which is concerning given their numbers already. It was the worst quarter for US equities since 2008, with pretty much all of the selling occurring in March, after the S&P 500 set its all-time high record in February. Technically, the S&P 500 index seems to have held 2,600-2,630 as resistance and has now pulled back below 2,500. The next level to the downside is some potential support at 2,300.
XJO Implied Volatility was up 12.60% and closed at 40.766%. The US volatility fell 6.61% and closed at 53.54%.
US oil dipped, with prices toying with the key $20USD a barrel level.
Gold dropped rose slightly overnight. Prices in Australian dollar terms (given the fall in the AUD) remain extremely strong.
Iron ore dropped overnight, reversing the previous session’s gains. Prices remain strong considering the economic situation, but they have come off their highs. Please note that the change in DaLian futures prices reflects a change in the contract expiry month.
The Aussie dollar again fell against the US dollar overnight, prices remain fairly weak but have recovered a fair bit from the lows.
Our market has shown incredible resilience in the face of selling overseas and I like to believe that it is because we have done a good job in slowing down the rate of our infections. Regardless, we will see a weaker open this morning, and Australian shares trading on US markets were savaged like everything else overnight. Our strength in the short-term is admirable, but there are still some valuations on our market that do not reflect the economic situation, or even the company’s financial position. At a time like this, it can pay to be cautious.