The XJO is expected to open lower this morning following a pullback in the U.S overnight as they settled back into their consolidation range. Their move last Friday was a false break higher and our market feels uncomfortable holding yesterday’s gains in the wake of their return to indecision. Their futures are also flat giving little to no indication of where their next move may be.

Yesterday we gave up roughly half our intraday gains heading into the close, and this morning we should give up the rest. We are set to open back underneath the previous resistance at roughly 7,125 at roughly the same price we closed at on Friday (~7,075). Its like yesterday didn’t happen, which is in step with how the U.S looks after their move last night. However, yesterday did happen, and it at least shows a willingness for our market to price in gains if we can just see the U.S do the same. It also means we have set a higher peak, giving credence to the idea that we have indeed changed to a bullish trend after having traded in downtrend since roughly August.

Keep in mind we have RBA interest rate decision today at 2:30pm (AEDT). It is expected that they will keep rates on hold, and we are hoping to see indications from Bullock’s statement that we are peak rates.

US Markets

US shares closed lower overnight, with each of the three major indices closing notably in the red. There was a lack of major US economic data, though a report did show that factory orders fell by more than expected in October. Mainly though, prices simply fell from key resistance levels after the mammoth run that they had enjoyed during November. Given the move we have seen, some profit taking and a pull back shouldn’t be unexpected. There is a lack of major US economic data until the jobs report on Friday, so don’t be surprised to see a bit of a lack of direction this week.

Four of the eleven sector groups of the SP500 closed higher overnight, with Real Estate and Healthcare the best performers. Materials, Technology, and Communications stocks saw the most selling.

Technically, the SP500 fell from resistance at 4,600 overnight, though it also lifted off its lows as it returned to near the 4,550 level. This level has been magnetic for the index across the past fortnight, and until we see a clear directional break away from this level, its hard to take a bullish or bearish view. Overall the index does look a bit overbought, so we could see a higher trough in the short-term.

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