The XJO is expected to open lower this morning following both a similar move from the U.S last night and their negative futures this morning.

Yesterday we held 7,470 once again to finish on 7,450. These levels are roughly proving to be the new resistance for our market. There is a short-term decelerated uptrend line that comes in at 7,400 which we should test on open this morning. Roughly 7,400 was the previous resistance which we broke through on the low inflation reading last week and has been used as support since. Unless U.S futures continue to fall today, it seems likely we hold it.

The RBA held rates yesterday which pushed our market higher, but poor earnings overseas in the U.S will drag us down today. It is hard to rally and price in gains when the U.S tumbles – which remains looking overbought.

US Markets

US shares closed lower overnight, with each of the three major indices finishing in the red. US shares fell after some disappointing earnings results, with Merck&Co and Pfizer both falling after their earnings announcements. US economic data was also perhaps a bit weaker than expected, with ISM manufacturing data and JOLTS job openings both lower than expected. Despite the weak earnings reports and economic data, there was however a big drawdown in US oil inventories, which sent oil prices ticking back up. Weak economic data with rising oil prices is not what the market wants to see, and with US indices around their resistance levels, we could see selling creep in. The next major bit of economic data for US markets is Friday’s jobs and unemployment data.

Nine of the eleven sector groups of the SP500 closed lower overnight, with only Industrials and Technology stocks finishing in the green. Utilities and Discretionary stocks saw the most selling overnight.

Technically the SP500 is holding below a potential resistance level at 4,600, this level would have to break for further gains to look likely. The index remains on an overall uptrend but after some extremely positive recent movement, don’t be surprised to see some profit taking and a bit of a pullback. Should the index fall from here, recent resistance at 4,450 may now act as support.

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