The XJO is expected to open lower this morning following a strong pullback I the U.S overnight. Their futures have edged into the green.
The U.S reacted poorly to the Fed meeting last night and will drag us down with them this morning. Our market managed to just squeeze fresh highs yesterday, and as usual, we are selling down straight afterward.
We are expected to open near 7,600 this morning, shedding most of yesterday’s gains. With U.S futures in the green, hopefully that will be the extent of it, however don’t be surprised if our market gives up and tests 7,550.
This pullback was long overdue from both a technical and fundamental perspective. Now the question is how long will it last. The U.S seems set to retest their previous all-time highs now as a support. This could translate to anywhere from 7,550 to 7,450 for our market. This is also where our underlying uptrend line comes in.
US Markets
US shares closed firmly lower overnight after the Federal Reserve meeting for January. The Fed kept interest rates unchanged, which was widely expected, but they poured cold water on the idea of a March rate cut, suggesting that interest rates might have to remain at high levels for a little while yet. Markets have been rallying strongly on a belief of a March cut, with up to another 6 cuts expected this year as well. With the timetable for rate cuts pushed out, the recent rally for US shares does look a bit over the top. Fed Chair Jerome Powell did say however that he thinks rates have peaked. US economic data continues to look very strong, so until we see a notable economic slowdown, with definitive drops in inflation to target range, the Fed will likely keep rates high. US company earnings reporting also hasn’t been particularly strong over recent days, with Google and Microsoft seeing particularly strong selling after recent results.
Every major sector of the SP500 closed lower overnight, with Communications, Technology, and Energy stocks the weakest performers. Most other sectors also saw notable selling.
The SP500 fell overnight, with the index reversing the last week of upwards movement. Should we see further selling, the first downside target likely the previous resistance at 4,800 index points. Should we see the index resume buying, the recent peak of roughly 4,930 is the mark to beat before further gains will look likely.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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