Gains in our XJO have been held back by a strong Australian dollar and Friday’s drone strike. Its hard to say what we may do today, but we look set for a fairly subdued open. To the upside, there is resistance at 6,775 and the all-time high resistance at 6,875, If the XJO does break above 6,875, there are no previous levels of resistance so its hard to say where it might head if it breaks. The next target to the downside is the medium term uptrend. If the uptrend breaks, 6,500 would be the target. If 6,500 breaks, we should see the index start to downtrend.
Northern Star Resources Ltd (NST) led the market gains and closed +5.8% higher, after the Company announced that it had successfully completed the acquisition of all the shares in Kalgoorlie Lake View from Newmont Goldcorp Corporation for a total consideration of US$800m. Evolution Mining Ltd (EVN) was down -2.1%, following the news that one of its major shareholders, La Mancha Group had reduced its stake in the Company from 7.65% to 6.64%.
US stocks fell on Friday, as a US airstrike killed a prominent Iranian General. The Dow closed 233.92 points lower (-0.81%) and the S&P 500 was down 23 points (-0.71%).Most European and Asian markets also fell.
Friday’s US drone strike in Iraq has worried markets that there will be Iranian retaliation or other military escalation, which sent markets lower, but gold and oil higher. The S&P 500 fell from fresh all-time highs, so the recent high around 3,250 may act as resistance. If the S&P 500 falls from here, there are potential levels of support at 3,150, 3,100, 3,050, and 3,020. If those levels break, 3000 is the next key level, if that goes we could start to see the index downtrend. Over the weekend a eulogist at the Iranian General’s funeral implied a bounty on US President Trump, while Trump stated that were Iran to retaliate, the US would destroy 52 Iranian sites – meaning that things are yet to cool between the nations.
XJO Implied Volatility was up 5.92% and closed at 13.051%. The US volatility fell 10.51% and closed at 12.47%.
Oil jumped with the drone strike and the fear of further military escalation.
Gold also rose with the drone strike.
Iron ore was mixed on Friday.
The Aussie dollar fell for the second day and is holding below 70 US cents.
Today’s trading: In China, data on Caixin China PMI composite and Caixin China PMI services to be published. In Japan, data on Jibun Bank Japan PMI manufacturing and vehicle sales is anticipated. In the U.K., we get data on Markit/CIPS UK services PMI and Markit/CIPS UK composite PMI.
Our market looks set for a subdued open today, especially as we are one of the first markets to open for the week. Ongoing geopolitical concerns will likely keep our market down today, but a falling Australian dollar and rising commodity prices should help our market to the upside. Otherwise, we should start to see volume come back onto the market this week, so trade with the technical signals that you see.