The XJO is expected to open lower this morning following a pullback in the U.S overnight which saw them pull back into their consolidation range. Coupled with their green futures this morning, our market should hold our own consolidation range and halt just above 7,200.
There isn’t much to say except that markets continue to track sideward, albeit with more volatility in the U.S. With potential higher interest rates both locally and in the U.S on the books, and debt talks not progressing in the U.S, we maintain a position that there is more pressure to the downside. FOMC minutes will be released tomorrow morning, which could act as a catalyst.
Technically, the levels remain the same. Roughly 7,300 remains the top of the consolidation range, and roughly 7,230 remains the bottom, and the market seems to want to hang around 7,250. If we do see falls, then 7,200 to 7,150 remains key support. Otherwise, if the market pushes through 7,300, then 7,350 to 7,400 remains key resistance.
US Markets
US shares closed firmly lower overnight, after mixed economic data and with the debt ceiling issues yet to be resolved. On the economic data front, US manufacturing PMI and building permits were weaker than expected, while new home sales and services PMI were slightly better than expected, overall data continues to weaken, though perhaps not at a pace that suggests inflation is coming down as well. The default deadline for the US could be as early as the 1st of June, and as this date approached with no resolution to the debt ceiling, we could see further volatility. Still, a deal is likely to cause a one or two day spike higher.
Ten of the eleven sector groups of the SP500 closed lower overnight, with only Energy stocks rising after a jump in energy prices. Every other sector closed lower, with Materials, Technology, and Communications the worst performers.
The SP500 remains in the sideways consolidation range of 4,050 to 4,200 and we have to expect further sideways movement unless 4,200 or 4,050 breaks. Should it break above 4,200, we will be seeing an uptrend for the SP500, with a possible upside target of 4,300.
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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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