The Australian share market faces an important test today. 2016 highs in US shares and resurgent commodity prices should see positive trading. However, the Australia 200 Index is uncomfortably close to its 5400 ceiling, and whether the index clears or fails this hurdle could determine market direction for weeks and months to come.

A weakening USD and further draws on US crude oil stockpiles saw both precious and industrial metals move higher. Combined with stronger than forecast import data in China, this shook short sellers of resource stocks. BHP shares leapt 2.4% in London and 3.1% in New York, suggesting resources could lead trading this session. Energy shares are set for a second day of stellar gains as crude moves up and away from the $50 per barrel mark. Gold stocks are also likely to find support.

The key question for the market remains the inability to hold ground above 5400. A close above the 2016 high at 5425 would be a very positive development, potentially sparking technical buying and a Fear of Missing Out rally. The knife edge nature of the current market predicament is illustrated by the fact a failure at 5400 today could quickly bring a two hundred point index tumble.