Technically, the XJO stalled at some resistance around 6,750 yesterday, falling back below the level despite opening above it. If the XJO can rise through 6,750 – the all-time highest close at 6,851 would be the target. The XJO is rising on a short-term uptrend line, if the XJO breaks through the short-term uptrend line, there is support at 6,600- 6,630, the next target to the downside after that would be a more gradual, longer-term uptrend line around 6,550. We will see some domestic bank reporting, starting with ANZ on Thursday, that in addition to US market movements will likely influence the direction of our market.
Sims Metal Management Ltd (SGM)was down -8.8%, after the Company said it expects an underlying EBIT loss of A$20-30m in 1H20 amid a slump in scrap-metal prices. Lithium miners including Galaxy Resources Ltd (GXY) and Orocobre Ltd (ORE) were up +6.6% and +5.6%, respectively, on concerns of pressure on supply of the metal following the news that protesters in Chile have blocked access to lithium operations in the country. Coles Group Ltd (COL) was down -2.7%, following a broker downgrade to Underperform from Neutral.
US markets closed higher on trade optimism, as Trump announced just before the opening bell that phase one of the US-China trade deal is ‘ahead of schedule’. The Dow closed 132.66 points higher (0.49%) and the S&P 500 was up 16.87 points (0.56%). European and Asian markets were also higher.
US markets were buoyed by Trump’s positive tone with regards to the US-China trade deal, as well as the expectation that the US Federal Reserve will cut interest rates when they meet on Wednesday this week. Technically, the S&P500 rose through the all-time high of 3,027 to set a new highest close of 3,039; there is only blue sky above, so it is hard to know where it will stall. If the index falls, 3000 is the support level, and if that breaks it could be expected to head back to some potential support at 2,960, followed by 2,940. If those supports fail, 2,860 would be the target.
XJO Implied Volatility fell 0.69% and closed at 11.386%. The US volatility fell 6.86% and closed at 13.11%.
Crude dropped a fair bit lower, reversing some of the early gains.
Gold fell back below the key $1,500 USD support/resistance level.
Iron ore fell overnight.
The Aussie dollar rose slightly against the US.
Today’s trading: In the Australia, CPI data is to be published. In the U.S., data on consumer confidence is anticipated. In Japan, we get retail sales and CPI data.
US markets pushed into all-time highs overnight, with Trump’s comments just before open helping to spur them on. They are also optimistic that the Fed Reserve will cut rates on Tuesday, all while US company earnings results come in better than expected (although still lower than this time last year). Domestically we should see a rise on open today, although our gains may be somewhat mitigated by the fact that most commodities pushed lower despite the optimism. Our market may continue to see modest gains as we follow the US, but to see strong gains we will likely need to see commodities rise, or some strong bank reporting starting with ANZ on Thursday.