The XJO is expected to open flat this morning following a subdued night of trading in the U.S. Their futures are also flat.
After a strong run higher from our lows, it makes sense to see markets pause for the moment. Especially considering we have paused at the 50 day MA, and that there is an anticipated U.S CPI reading tomorrow night.
In recent history, our market has typically edged lower in caution leading into these events when the U.S provides little leads. However, our sentiment is clearly still bullish and so we could easily hold ground here as we await further direction from overseas.
US shares were largely unchanged overnight, with the DOW JONES closing slightly lower, the SP500 flat, and the NASDAQ slightly higher. There was little in the way of news or events overnight and instead prices largely treaded water. Markets have been a bit shaken by recession worries, so any economic data that points to an accelerated decline of economic activity or recession could trigger market volatility. This week will be all about CPI for US markets. The CPI reading is on Wednesday night and as long as it doesn’t rise from here, it should open the door for a Federal Reserve rate cut next month. An unexpected rise from CPI could disrupt the market however.
Only three of the eleven sector groups of the SP500 finished in the green overnight, with Technology the strongest performer. Most sectors saw moderate selling with Real Estate stocks the weakest.
Technically, on Friday the SP500 pushed through the potential resistance at 5,330 on Friday, which suggests further upwards movement. The index is still in an overall longer-term uptrend, but we can no longer draw a comfortable uptrend line. Instead, we must look at key support and resistance levels as potential targets. With a break of 5,330, the next target should be 5,400. Should the index fall from here, the recent low around 5,200 would be the downside target.
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