The XJO is expected to edge higher on open this morning following a meek recovery in the U.S overnight. Their futures are strongly in the green this morning, though led by tech, which is not well represented in our market.
We should open near the highs of yesterday, and with positive U.S futures, should continue higher to retest resistance at roughly 7,650 to 7,700 today. This is also roughly where the down-trend line comes in depending on how you draw it. The 50 day MA also comes in roughly 7,700 which will likely remain a key sticking point for markets as uncertainty persists.
We have U.S jobs data tonight which can throw everything out the window. Powell was very dovish in his address on Wednesday night, essentially reassuring markets that things are fine. However, data has been saying otherwise. On one hand, you have stronger than expected economic data. This should keep interest rates elevated for longer than originally expected. It could even push us back into a rate rising cycle. On the other hand, you have the head of the Fed, who represents monetary policy for the largest economy in the world, essentially saying not to worry. If jobs data is stronger than expected, markets may choose to turn a blind eye and follow the guy who pulls the interest rate lever, or it could sell down with the fear that Powell will have no choice but to change his rhetoric. We will simply follow whatever they do.
Technically, both markets are trading in triangle patterns. Our market is skirting along the downtrend line, with key support at 7,500 to 7,550. We should expect the downtrend to win and for support to break, but again, data is the real driver of markets at the moment and tonight could produce any result.
US Markets
US shares rebounded overnight, with each of the three major indices finishing in the green. Investors likely bouoght up after FED Chair Jerome Powell’s comments at the close yesterday, where he stated that further rate rises were unlikely. For a market that had been hoping for rate cuts this year, it wasn’t a super positive statement, but at least it prevented further selling at the time. Overnight we did also see some wages data come in stronger than expected, which is not what the market wants;the market did fall initially after this data, but it was able to quickly retrace the selling. After US markets closed, Apple reported better than expected results, which has sent global futures strongly higher and which could lead US shares strongly higher tonight. However, there will also be a full US jobs report tonight, and for prices to rise, jobs data will probably need to be worse than or in-line with expectations, with wages growth slowing.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Technology, Discretionary, Real Estate and Communications seeing the most buying. Materials was the only sector to close notably lower.
The SP500 has recently bounced down from a medium-term downtrend line, potentially signalling further bearish movement. The recent low around 4,950 is now the downside target and the major support level to watch. This leaves the index in a descending triangle and we will either need to see a break above the downtrend line (currently around 5,100) or a break below 4,950 before further movement will look likely. Should the index break below 4,950 the downtrend will be continuing and we could see a move back to 4,800 – 4,850.
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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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