The XJO is expected to edge higher on open this morning following renewed buying in the U.S overnight. Their futures are flat.

Yesterday we managed to crawl back most our opening losses to finish marginally flat. We were likely driven by positive U.S futures that moved higher through our session, heralding the renewed buying we saw last night.

We should retest key resistance at 7,450, which is the second highest point our market has traded at this year. If we can manage to push through, then all time highs near 7,600 looks achievable. Of course, we would need to see the U.S continue their crawl higher.

However, markets are looking very overbought by short-term metrics, and with them trading at very key levels of resistance, one must wonder if we will have the strength to keep pushing higher. The reality is, the question of a pullback is not “if”, but “when”.

Picking tops is as hard as picking bottoms, and the U.S has shown over the past few weeks that it is happy to dog leg higher after spats of consolidation. Just when it looks like it has run out of gas, buying renews. They look hellbent on reaching their all-time highs.

US Markets

US shares closed higher again overnight, with each of the three major indices seeing modest gains. There was a lack of major news overnight, so instead prices continued higher with the current bullish momentum. The DOW JONES is currently trading at an all-time high, while the SP500 and NASDAQ could achieve an all time high in the months ahead, especially if the current optimism continues. The optimism will face a bit of a test tonight with the release of European inflation data, which could test the global narrative around peaking interest rates. The other worry for peaking rates could be a bounce in oil prices, which has occurred after some shipping through the red sea has halted due to attacks from Yemen.

Eight of the eleven sectors of the SP500 closed higher overnight, with Communications, Staples, and Discretionary stocks faring best overnight. Most other sectors were fairly flat.

Technically, the SP500 is on a very strong upwards movement and it continues to grind higher without any troughs. Overall the momentum remains to the upside and we would expect an eventual rise to the all-time high around 4,800. However, we could also see a profit taking pull back first, with an expected higher trough on any pullback in the short-term.

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