MARKETS SPECTATOR: US sells the rally

Despite US stocks finishing the session largely unchanged on Friday, the major indices were still down about 2 per cent for the week, which made it the worst weekly performance in four months.

And this came despite a much stronger-than-expected third quarter result from JPMorgan and a consumer sentiment reading that climbed to the highest level in five years.

So it's not exactly brilliant news when stocks can't rise on the back of strong data. It shows that the market has had a very good run and is tired. Stocks did actually manage to pop their heads higher early but participants used the strength to sell into it.

This is one of the key psychological differences between the Australian and US markets at the moment. Locally, we're still seeing participants willing to ‘buy the dip' whereas in the US the mentality has changed to ‘sell the rally'.

So following Friday's nights session Australian futures are pointing towards a modestly lower open around the 4473 level, ten points lower than Friday's 4483 close.

It looks like it will be broad-based weakness too after most US sectors came under some sort of selling pressure. BHP Billiton's ADR is pointing towards a 0.4 per cent fall this morning following softer base metal leads from London.

Having said that, it's worth remembering that China's trade balance came in stronger-than-expected on Saturday so that may help limit the downside pressure. There is also a bit of data due out today too. At 11.30am AEDT Australian Home Loan and New Motor Vehicle Sales are due for release.

There are no expectations for the Motor Vehicle Sales but the market is expecting a 1.4 per cent rise in Home Loans. At 12.30 AEDT Chinese CPI and PPI are due for release. CPI is forecast to rise 1.9 per cent while PPI looks like declining 3.4 per cent.

So any surprises to the upside in this data could help to limit the extent to any weakness.