The XJO is expected to rally on open this morning following a surge higher in the U.S overnight. Their futures are flat.
The Fed maintained a dovish tone, fueling further gains overseas, and at this stage our market is happy to follow along.
We should flirt with 7,750 on open this morning as we did yesterday. But unlike yesterday, where we pulled back to finish flat, we seem likely to break through.
7,850 is the next broader target, but don’t be surprised if we finish near 7,800. It is not a resistance level at this stage, but our market seems to like whole numbers and it would be hard to expect much more than 100 points of gains in a day with the way markets have been trading lately.
Despite the uptrend line breaking a couple of weeks ago, we can see that the market remains trading in an uptrend, with strained momentum remaining bullish. We will need to see how our market reacts to 7,850, as it wouldn’t be surprising to see our market hold all-time high resistance and trade in a broad sidewards range. For us to continue pushing through, we would likely need to see the miners continue to rally. Otherwise, the financials will need to continue doing the heavy lifting and they remain overvalued at this stage.
US Markets
US shares closed at fresh all-time highs overnight after the US Federal Reserve remained dovish. The Fed’s dot plot retained three rate cuts this year and Fed Chair Jerome Powell somewhat dismissed the inflationary data in January and February as potentially being a blip higher in the overall move lower of inflation. The probability of a June rate cut has raised to around 70 percent now according to the market, up from around 50 percent at the start of the week. The statements from the Fed made clear that they still expect economic data to weaken from here, despite obvious strength in the first quarter, and that they will wait for things to weaken before taking action. The dovish Fed has allowed prices to continue higher again, but from a valuation perspective, prices continue to look very expensive at the current levels, this doesn’t mean they won’t first continue higher, but it does mean the correction could end up being more severe when it does occur.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Discretionary the strongest performer, followed by Communications, and Financials stocks. Most other sectors also closed higher to a notable degree, except for Energy and Healthcare.
Technically, the SP500 broke out of the ascending triangle overnight as it broke above the previous all-time high resistance. Technically, the SP500 looks like continuing higher from here, though given these levels have never been seen before, its hard to say where the rally may stall, to the downside, the previous resistance at 5,175, which is also roughly where the uptrend line sits, is likely to act as support.
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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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