All-time highs?

The XJO is expected to open higher this morning following another night of gains in the U.S. Their futures are flat.

Yesterday we managed to break through key resistance at roughly 7,450 and today we look set to test the next key level at roughly 7,550. The strength underpinning markets is almost dizzying and it doesn’t look like its going to stop until we reach all-time highs.

Markets are extremely overbought in the short-term. The recent break-neck rally is unsustainable, and profit-taking is inevitable. It is just hard to know when. Will markets make reach all time highs? Will they push through and make fresh ones?

When we do see a pullback, there is roughly key levels of support every 50 points. If it is a slow consolidated grind lower, then we should expect to flirt with each one. However, if it is an “A” shaped pullback, then we could glow past a few before holding.

US Markets

US shares closed higher again overnight, with the SP500 rising to within one percent of its all-time high. One month ago such a statement would have sounded ridiculous, but after a ‘pivot’ from central bankers towards signalling rate cuts next year, markets have pretty universally hit ‘BUY’. It has been the strongest rally in recent memory, probably even superseding the post-COVID move in speed and intensity. There was a lack of major US economic data overnight, though Housing Starts and Building Permits data was mixed. Instead, prices simply continued the current strong momentum higher.

Every major sector of the SP500 closed higher overnight, with Energy the strongest performer, followed by Communications, Materials, and Industrials stocks.

Technically, the SP500 is on a very strong upwards movement and it continues to grind higher without any troughs. Overall the momentum remains to the upside and we would expect an eventual rise to the all-time high around 4,800. However, we could also see a profit taking pull back at some point, with an expected higher trough on any pullback in the short-term.