The Australian share market is expected to maintain its bumpy journey and edge higher as the broad-based benchmark Standard & Poor’s 500 Index rose to an all-time high on Thursday as investors shrugged off a key inflation report that showed a bigger-than-expected increase in price pressures.
The ASX futures were up +1 point to 7,307, while our local currency, the Australian dollar, is currently buying US$0.7754 (as of writing).
U.S. headline inflation as measured by the Consumer Price Index (CPI) jumped again in May, marking its highest annual inflation rate since the summer of 2008 amid the economic recovery from the pandemic-triggered recession, the Labor Department said on Thursday.
The U.S. (CPI), which represents a basket including food, energy, groceries, and prices across a spectrum of goods, rose 0.6% in May on a seasonally adjusted basis and was up a stunning 5.0% from a year ago, coming in hotter than consensus expectations.
The U.S. core (CPI), which excludes food and energy, was up 3.8% year on year, the highest since 1992.
Used cars and trucks prices surged 7.3% in May from April and were up 29.7% from a year ago.
That component alone accounted for about a third of the month-on-month increase.
New cars and trucks prices rose a more modest but still robust 1.6% in May from April and were up 3.3% from a year ago.
Separate data released Thursday showed U.S. jobless claims for the week ended June 5 came in at 376,000, versus the 370,000 forecasts, extending a recent decline for unemployment benefits and adding to signs of a healing labour market.
However, the total still marked the lowest of the pandemic era.
At the finishing bell, on the New York Stock Exchange (NYSE), the broad-based benchmark Standard & Poor’s 500 Index set a new closing record, climbing +19.63 points, or +0.47%, to a record closing high of 4,239.18.
The S&P 500 also hit an intraday record of 4,249.74, overtaking its May 7 high after the market traded sideways for a month.
The blue-chip Dow Jones Industrial Average advanced +19.10 points, or less than +0.1%, to 34,466.24, while the technology-focused Nasdaq Composite Index climbed +108.58 points, or +0.78%, to 14,020.33.
The Dow and Nasdaq are both within 1% of the all-time highs they hit this spring.
The yield on 10-year Treasury notes edged down to 1.458%, its lowest level in more than three months, from 1.489% on Wednesday.
Viewing the S&P/ASX 200 (XJO) daily chart, the Japanese candlestick bearish outside range day still has potential in the short-term, if we witness a daily close under 7,265.
This would confirm the bearish outside range day and put a trajectory in motion to 7,140. Reassess from there.
A Japanese candlestick bearish outside range day, also called a bearish engulfing, supports a negative case in the near term.
A bearish outside range is when the entire day’s price activity makes a higher high and a lower low than that of the previous day’s trading session, which now has confirmation to this candlestick.
The Relative Strength Index (RSI) 3-daily ‘lookback’ indicator remains in the overbought zone, though we need to keep an eye on the pattern as bearish divergence is potentially forming.
Divergence is a popular trading signal because they are dynamic and often offer a reliable, high-quality trading signal reversal when combined with other trading tools and concepts.
In technical analysis, divergence can be an important warning signal that a bullish or bearish trend is coming near an end.
Divergence appears when a technical indicator (oscillator) begins to establish a trend that disagrees with the actual price movement.
These “disagreements” are strong signals and somewhat useful for the trader/investor.
Meanwhile, the Moving Average Convergence Divergence (MACD) is positive, though, slowly declining and also needs to be monitored.
The Average Directional Movement Index (ADX) trend indicator holds a positive signal (bullish trend).
Developed by J. Welles Wilder, the Relative Strength Index (RSI) is an extremely popular momentum indicator (oscillator) that measures price movements’ speed and change.
RSI oscillates between zero and 100.
According to Wilder (depending on the period setting), the RSI is considered overbought when above 70 and oversold when below 30.
Signals can also be generated by looking for divergences, failure swings and centreline crossovers.
RSI can also be used to identify the general trend.
Gerald Appel developed the (MACD) technical indicator back in 1979, while in 1986, Thomas Aspray added the histogram.
The MACD is a tool used to identify moving averages that indicate a new trend, whether bullish or bearish.
(MACD) plots the distance between moving averages and helps traders identify trend direction and whether the bullish or bearish momentum in the price strengthens or weakens.
Still remaining in uncharted territory, the immediate resistance level is 7,340, with 7,385 located above. Reassess from there.
The support is viewed from 7,265-75, with 7,195, and then 7,140 situated beneath. Reassess from there.
Daily outlook on the benchmark S&P/ASX 200
The Australian share market advanced to an intraday high of 7,314.6 on Thursday, with the previous day set at an all-time high at 7,334.90.
At the closing bell, the benchmark S&P/ASX 200 index rose +32.3 points, or +0.44%, to 7,302.5, while the All Ordinaries added +36.8 points, or +0.49%, to 7,558.8.
Real Estate, Information Technology, Utilities, Telecommunication and Financials were offset by losses in Energy.
Energy stocks were in the red, with Woodside Petroleum slipping -1.47% to $23.41, while Oil Search fell -3.3% to $4.07, Santos lost -0.91%, to $7.60, Beach Energy lost -1.47% to $1.345, and Worley tumbled -3.27%, to $11.84.
Technology stocks were firmer with Buy-now-pay-later giant Afterpay climbed +1.02%, to $99.85, accounting software provider Xero rose +2.96%, to $133.11, Altium added +1.2%, to $34.71, Megaport gained +0.83%, to $15.84, NEXTDC added +1.75%, to $11.62, EML climbed +3.7%, to $3.92, Zip Co rose +0.73%, to $6.87 and Nearmap advanced +0.27%, to $1.84.
Materials were mixed, with Fortescue Metals Group leading the titans higher after climbing +0.79%, to $22.83, while BHP Group lost -0.76% to $48.30, and Rio Tinto added +0.1%, to $124.92.
Gold stocks were mixed, with Newcrest Mining fell -0.04% to $27.49, Northern Star Resources rose +1.01% to $11.01, and Evolution Mining Ltd ended up +0.82% to $4.94.
The Financial sector was slightly mixed, with Commonwealth Bank leading the “Fab Four” (banks) higher after settling at a +0.76% gain to $101.85, while Westpac Banking Corp rose +0.15%, to $26.59, National Australia Bank ended up +0.23%, to $26.62, Australia and New Zealand Banking Group lost -0.14%, to $28.69.
Meanwhile, Macquarie Group advanced +0.73% and settled at $152.51.
Supermarket giants Coles and Woolworths were mixed as Coles fell -0.42% to $16.69, while its rival Woolworths rose +0.77% to $42.96.
E-commerce group Kogan lost -1.86% and settled at $10.58, while Seek rose +3.67% to $31.05.
Meanwhile, JB Hi-Fi added +1.45% to $48.17, while Telstra ended flat at $3.57, while Wesfarmers rose +0.52%, to $54.61, Aristocrat Leisure gained +0.29%, to $40.92 and QBE Insurance rose -0.18% to $11.47.
Biotechnology giant CSL rose +0.37% to $295.21, while ResMed rose +3.72% to $28.13, Fisher & Paykel Healthcare lost -0.07%, to $27.28, and Cochlear rose +0.04%, to $234.65.
Travel stocks were weaker, with Sydney Airport falling +0.66%, to $6.05, Corporate Travel Management lost -3.26%, to $20.79, Flight Centre lost -2.61%, to $15.27, and Webjet tumbled -2.88% to $5.05.