Futures pointing to a bounce on open

The XJO is expected to open higher following a small move higher in the U.S overnight. Their futures sit flat to lower.

Our market showed us yesterday that it is pretty much looking for any excuse to sell. We started the session in the green alongside positive U.S futures. However, U.S futures turned mildly red by the afternoon, vindicating our market which had started to sell down. We ended up finishing at 7,000 support, and with the stability we saw last night, we are expected to bounce off of it this morning. 7,080 is now resistance which we tested intraday yesterday before pulling back. It would be hard to expect us to test it again today, as it seems it would require too much of a strong move higher than what would make sense in this type of environment. Not only is negative sentiment underpinning our market, but U.S CPI is due tomorrow night.

If we continue our decent from here, then 7,000, 6,950, and 6,900 remain the key supports. However, unless we see shocks from the CPI reading, it is reasonable to expect a relief rally soon like we have seen over the past month or so with 7,150 to 7,200 as reasonable targets.

US Markets

US shares closed higher overnight, with each of the three major indices finishing in the green. This was despite a series of Federal Reserve members speaking overnight, with each of them suggesting further rate rises at the July meeting in two-weeks’ time. There was otherwise a lack of US economic data overnight, so investors will instead look ahead to tomorrow night’s US CPI reading, which will influence the interest rate/inflation debate moving forwards. Later this week we will also see the start of a US company earnings season, though it won’t really kick off in earnest until next week. Overall, US shares are looking a little toppy after recent strength, so do be careful about the potential for downside movement.

Seven of the eleven sector groups of the SP500 closed higher overnight, with Industrials and Energy stocks the strongest performers. Communications stocks saw the most selling.

Technically, the SP500 is holding below the key resistance at 4,450 and looks like heading back towards the longer-term uptrend line, which could act as support against a downside move; this line currently sits around 4,350. Should the index rise from here, the recent resistance level at 4,450 would have to break before further gains look likely.

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