The XJO is expected to open lower this morning. Most U.S sectors were down – it was only tech that really helped their market finish flat which doesn’t have nearly as much weight locally. Furthermore, yesterday our market was hopeful for a relief rally in the U.S, heralded by their strong futures during our session, which did not end up manifesting overnight.

We should test key support at 6,950 on open this morning. This was the intraday low from the recent sell down, and marks a key historic support. Should this level break, then 6,900 is the next key level support and represents the floor of the broader channel we have been trading in since roughly November last year.

Even though our market is lamenting this morning (perhaps dramatically so), we should still expect these levels to hold. The fundamental environment doesn’t seem to have worsened, and despite negative sentiment clearly underpinning markets, at this stage it doesn’t feel warranted to make fresh lows.

US Markets

US shares closed relatively flat overnight, with the DOW JONES slightly lower, the SP500 flat, and the NASDAQ slightly higher. Over the weekend, the US government announced a funding deal, to keep the government open for another 45 days, staving off a shutdown. This wasn’t positive enough to send US prices too much higher overnight, and instead markets may have focused on the economic data, which showed US manufacturing growing at a stronger rate than expected – when the market wants to see the economy slowing. Still, US markets are mostly firming up around support levels, and waiting to decide whether to rebound higher or break lower.

Three of the eleven sector groups of the SP500 closed higher overnight, with Communications and Technology stocks the strongest performers. Most other sectors closed a fair degree lower, with strong selling in Utilities, Real Estate, and Energy.

The SP500 index is holding just above the support levels around 4,250. The index did show a ‘morning star’ pattern earlier in the week and it did record a higher high and low on Friday. However, the resistance at 4,330 will have to break before further gains look likely. Should the index break below recent lows around 4,250, they are likely to see further selling.

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