The XJO is expected to tumble on open this morning. The U.S was flat overnight and their futures are also flat this morning.
With little to no leads from overseas, our market is expected to pullback out of caution as we head into both a CPI update at 11:30am (AEST), and U.S GDP data on Thursday night. We should retreat back to the comfort of the 50 day MA, where by that metric the market is neither overbought nor oversold in the short-term. We should also test 7,700 on open, as well as an uptrend line that comes in at similar levels.
Markets are just treading water until the next data release. Stronger than expected data is likely to provoke profit taking in fear that rate cuts will be pushed further out. If data continues to cool slowly, markets may justify further gains.
US Markets
US shares closed mixed overnight, with the DOW JONES closing lower, while the SP500 was flat, and the NASDAQ rose. Strength in technology stocks helped to keep markets higher, with selling almost everywhere else. There was a pretty disappointing US government bond auction overnight, which pushed bond yields higher, and led to worries from the share market. Overall it suggests that investors might be predicting a little more inflation than previously, and they therefore demand higher interest rates. US share markets are overpriced at the current level but they seem content to hold near the all-time highs for now.
Only three of the eleven sector groups of the SP500 closed higher overnight, with Technology the strongest performer, followed by Energy stocks. Most other sectors saw notable selling, with Industrials, Healthcare, and Financials the worst performers.
Technically, the SP500 is holding a previous resistance level around 5,260 as support. This leaves the index in a very tight sideways range between the 5,260 level, and the recent all-time high around 5,320. We will need to see a close beyond one of these levels before a directional move will look likely. Should we break below 5,260, we could see a move back towards 5,150.
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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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