The XJO is expected to open flat this morning following the easter long weekend. The U.S were fairly flat on Thursday and Monday night as their market continues to track sideward into their underlying uptrend line.
We made fresh highs during our last session on Thursday. We managed to hold onto the gains, finishing near 7,900. Recently our market has met one or two days of strong movement with sidewards and indecisive movement. Indeed, this is what we are also seeing in the U.S of late. Keeping in step with this, and coupled with the long weekend, our market’s muted open was to be expected this morning.
7,900 may be the next key resistance considering our expected muted open. 7,850 is the next key level of support. There is also a short-term uptrend line which comes in at similar levels. Typically in recent history, when our market makes fresh highs, it either pulls back immediately, or tracks sidewards for a handful of days before pulling back. This may mean we see a test of 7,850 in the coming days. If that fails, then 7,750 is the next support. The short-term stochastic remain in the overbought area and the market remains elevated above the short, medium, and long-term moving averages. In essence, markets remain overbought from a technical perspective, but they have been for quite some time and we are yet to see any real commitment to a pullback.
Macro-economic data has been mixed to strong this year – stronger at least than what central banks want to see. This should push the promise of rate cuts further out than what was originally hoped for, especially in the U.S. This would have typically been expected to lead to a bear market, or even a simple correction considering the run we have seen since October. However, markets have largely shrugged it off, or even perhaps used it as proof of a soft-landing for economies which is extremely rare after a tightening cycle.
Ultimately, we should expect our market to continue to move higher with the underlying trend, until something changes in the U.S. We shouldn’t expect leaps and bounds, but a continued grind higher.
US Markets
US shares closed slightly higher on Thursday last week before pulling back overnight. The overnight selling came as US government bond yields rose, perhaps signalling that the market remains cautious about the likelihood of rate cuts this year. This came after comments from Fed Chair Jerome Powell on Friday that economic growth and inflation remain above target. The message was that the Fed doesn’t need to hurry to cut rates, and with US markets looking extremely overbought after a ridiculous first quarter of gains, this was enough to trigger some mild profit taking.
Only three of the eleven sector groups of the SP500 closed higher overnight, with Communications the strongest performer, followed by energy. Real Estate stocks saw the most selling,
Technically, the SP500 is trading just below the all-time high of roughly 5,250 index points. It will need to break above this level before further gains look likely. Should it break above this resistance, its hard to say where it may head, as these levels have never been seen before. Should the index fall from here, the previous resistance and the longer-term uptrend line around 5,180 – 5,200 are the key levels to watch.
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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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