The XJO is expected to edge lower on open this morning despite a small rise from the U.S overnight.

Our meek open may be put down to a few reasons. Firstly, U.S futures have edged into the red. Secondly, we managed to hold our gains yesterday despite a pullback in the U.S the night before, so much of last night’s rebound has already been priced in. Finally, the U.S finished right near their yearly highs and we are likely sceptical that they will push through. It is fair that we are not willing to price in further gains until they commit to a break higher.

Despite the wishy-washy, will-they-won’t-they consolidation we have seen from the U.S, sentiment has shifted for our market from tentative and cowardly, to positive. We are trying to rally. We are forming an uptrend, with higher peaks and troughs being made. We have made it back to the 200 day MA, which is not a huge accomplishment, but a good start. We will likely hang around here until the U.S moves now, with the comfort of knowing that the market is neither overbought nor oversold in the long-term as we are literally trading at roughly the same price the XJO has traded over the past year on average.

7,100 remains the next key support if we do see some selling, and 7,000 beyond that – which doesn’t seem like unreasonable targets in the short-term. It would provide a base in which to have a Christmas rally from, and the U.S is sort-of due for some profit taking. Otherwise, if the U.S commits and dog-legs higher, then we can expect 7,250 to 7,300 to finish the year.

US Markets

US shares closed higher again overnight, with strong gains in technology stocks helping to push US indices higher. The tech-heavy NASDAQ was the strongest performer of the three major indices. Overall, US markets do still have bullish momentum, but the movements are slowing as they approach yearly high resistance levels. Additionally, there will be an important US unemployment report tonight, which could push the market either way. Investors will want to see unemployment getting slightly worse (as it will be a sign that inflation is continuing to fall) but they don’t want to see it get too much worse, as this could be a sign of an upcoming recession.

Eight of the eleven sector groups of the SP500 closed higher overnight, with Communications and Technology stocks the strongest performers. Only Energy stocks saw notable selling.

Technically, the SP500 continues to hold just below the 4,600 resistance level, with the index magnetised to roughly the 4,550 level. Despite the bullish momentum, the index and hasn’t been able to break away from these levels for the past fortnight. Should we see a break above 4,600, that would indicate further gains, while with a break lower we would be looking for a higher trough on the current uptrend.

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