The XJO is expected to open higher this morning following a strong rally in the U.S overnight and their slightly positive futures.
We should break the recent consolidation range on open, pushing through 7,200. At time of writing, our expected open is near 7,270, which is just above where the key MAs have converged at roughly 7,250.
Unless U.S futures during our session herald stronger gains tonight, our market will likely do most its move on open, though there is a good chance we test 7,300 today. We would expect our market to hold near the MAs and 7,300 today.
Broadly, we would still expect markets to hold these levels and continue trading in a broad range. Data is showing that economies locally and in the U.S remain resilient, but are slowing down. Local employment data came in mixed. Unemployment remains at record lows, but underemployment is increasing. Retail sales data in the U.S last night showed a spike in petrol spending, but otherwise meek overall. Finally, U.S CPI on Wednesday night was mixed as well. Perhaps the recent strength in markets indicates that participants believe that central banks are managing to pull off a “soft-landing” – however, it doesn’t seem enough at this stage to push us into bull market territory.
US Markets
US shares closed notably higher overnight, with each of the three major indices finishing firmly in the green. This came after stronger than expected US retail sales, which jumped strongly in August, in part due to increases in spending on fuel. The trend in underlying spending slowed though, indicating that the economy is slowly cooling. There were also fewer than expected jobless claims overnight. Overall US data continues to come in strong, but it is debatable whether it is inflationary and going to trigger more rate rises. Overall US shares look incredibly expensive on a valuation basis, but many analysts are justifying this with the belief that the current interest rate tightening cycle will end in a soft landing. Whether that is the case remains to be seen.
All eleven sectors of the SP500 closed higher overnight, with Real Estate, Utilities, and Materials the strongest performers.
Technically, the SP500 bounced off the 4,450 support level and now looks bullish up to the next resistance at 4,525. Should that level break, it could return to the yearly highs around 4,600 index points.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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