The XJO is expected to open higher this morning following another strong move higher from the U.S overnight. Their futures however, have edged into the red, which may dampen any expected gains today.
Our open this morning should open near some interim resistance at 7,150. The next key level however is likely closer to 7,200 which is also roughly where a tentative downtrend line comes in. Furthermore, even though the recent rallies are very comforting and a strong sign that the market is moving past the recent banking crisis, in the short term we are likely due for some profit taking.
US Markets
US shares closed higher again overnight, with each of the three major indices finishing in the green. It comes after comments from Fed members and investment analysts in the US that the banking system is sound in general, though there are stock-specific concerns. Federal Reserve members also stated overnight that they aren’t convinced the fight with inflation is over and that more rate rises will be needed to deal with it. Many Fed members are seemingly taking the view that the market has gotten too far ahead of itself in forecasting peak interest rates and that rate cuts shouldn’t be expected this year. In US economic data, the latest US GDP reading for the fourth quarter of 2022 showed that growth was revised lower, to 2.6% (which is still extremely strong), there has also been a slightly larger than expected uptick in jobless claims than expected.
Financials were the only sector of the S&P500 to close lower on average overnight, with Real Estate, Technology, and Discretionary stocks again leading the upwards movement.
The S&P 500 has broken higher across the past few sessions, but it is now approaching resistance levels. This leaves the index in an upwards movement, but to continue, it will have to break above 4,080. Should 4,080 break, we should see a move to the next major level t around 4,150 index points. Should the index fall from here, the recently broken 4,000 resistance level may act as support.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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