The XJO is expected to open lower this morning following a small pullback in the U.S overnight. U.S futures are in the green this morning, but their move last night shows signs of an evening star reversal pattern and our market may start to price in expected profit taking.

Yesterday we showed signs that the bulls had run out of gas, as did the U.S in their previous session. However, U.S employment data is released tonight, which could either fill the tank back up or set the car on fire. Their recent data has been deflationary, and coupled with our own lower CPI this week, has spurred on one of the strongest rallies we have seen over the past month or two – hopefully tonight keeps on theme.

We are flirting with 7,300 resistance/support. If we fail here, then 7,250 and 7,200 are the next key levels. 7,250 is where the key MAs have converged. Otherwise, 7,350 to 7,400 are the next key levels of resistance – the former of which is our previous peak. If we make it back to 7,350, there is a stronger argument that we are no longer trading in a downtrend.

US Markets

US shares closed mostly lower overnight, with the DOW JONES and SP500 finishing lower, while the tech and growth based NASDAQ finished slightly higher. Shares initially traded higher but pulled back to finish around the lows of the day. The pullback coincided with some better than expected US economic data, which increases the risk of further interest rate rises. US personal spending, Chicago PMI, and Jobless claims were all better than expected, while European CPI came out higher than expected. US markets had been rallying recently with weaker than expected economic data, which caused investors to once again price in an interest rate peak – but should data restrengthen, they may just as quickly price in more rate rises. With the bullish momentum stalling in US markets overnight, its hard to say where their next directional move will be. Tonight we will see the US jobs report and this certainly could trigger renewed directional movement.

Four of the eleven sector groups of the SP500 closed higher overnight, with Discretionary stocks the strongest performers. Healthcare and Utilities stocks saw the most selling.

Technically, the SP500 stall at the resistance at 4,525, and pulled back. The index may now return to support levels, with the 4,450 level a potential downside target. However, should it rise through the current resistance at 4,525, the next level to the upside would be 4,600.

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