The XJO is expected to open flat following a tumultuous night of trading in the U.S which saw their market finish in the green. We have found in recent history that key CPI and Monetary Policy meetings have taken a few sessions to digest. Our market likely feels unsure how to interpret the move last night, their flat futures this morning, and awaits further direction.
We will likely have another day of subdued, range-bound trading today, unless U.S futures push one way or the other during our session.
7,150 to 7,200 is the next clear support, with 7,100 being the next clear target if they fail. 7,300 to 7,350 remains clear resistance with 7,400 the next clear target if we push through. We are roughly trading in the middle of the range, with little indication as to the next move.
US Markets
US shares closed mixed overnight, with gains in the SP500 and NASDAQ, while the DOW JONES closed lower. The major event overnight was the US CPI reading, which came in very slightly lower than expected. However, the level of CPI is still well above target ranges and the number did not come down between March and April. Should CPI stay at these levels in coming readings, the US Federal Reserve will need to continue lifting interest rates, and markets had been rising on the optimism that rates had reached their peak. US markets are also worried about the approaching US government debt ceiling, which could also lead to market selling. Despite these factors, US markets are remaining near their highs for now, with hopes around a soft-landing from the current rate rise cycle helping prices stay strong.
Six of the eleven sector groups of the SP500 closed higher overnight, with Technology, Communications, and Real Estate stocks the strongest performers. Energy stocks saw the most selling overnight.
The SP500 is still in a bit of no man’s land, above the 4,050 as a support level from last week last week, but below the 4,170-resistance level. Its not at all clear which way the market wants to break, but should the 4,170 level break, the next upside target is very close by at the 4,200 resistance level. Should 4,050 break to the downside, the next target would be the 4,000 point level.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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