The XJO is expected to edge lower on open this morning.

Yesterday, U.S futures heralded a stronger pullback which our market was skeptical to start pricing in and we managed to hold flat in the face of it. It seems we were vindicated, with the U.S overnight managing to claw back almost half of the intraday losses.

Their futures have edged into the red this morning. The U.S is now consolidating near the top of the range. They are on the precipice of either bouncing from the underlying uptrend line, or breaking lower. Our market of course is likely to follow the outcome. At this stage it seems like we are due to finish the week with continued sideward movement. It doesn’t seem likely that we make fresh high beyond 7,700, and it equally doesn’t seem likely that we breach 7,500 to the downside.

Both markets are trading in a broad ascending triangles, and at this stage seem on track to trade right to the point of them. We will have to wait and see of course, but typically we would expect a break in the underlying trend, which would translate to fresh highs. However, there is a strong enough argument for bearish to sidewards movement too, as fundamentally the likelihood of rate cuts being pushed out has been increasing.

US Markets

US shares closed lower overnight, with each of the three major indices finishing in the red. Selling was led by the large technology shares that have done plenty of the heavy lifting for markets this year, which included strong selling from NVIDIA, which sold down ahead of its earnings release tonight. There was otherwise a lack of major US economic data, and instead prices fell back to trend as investors took profits with markets around all-time highs. Overall, US markets do look quite overbought after rallying for three months straight, without any notable pullback. Tonight’s NVIDIA report does create risk for the market as it will have to be extremely good to justify the 300% gain for the share across the past 12 months.

Ten of the eleven sector groups of the SP500 closed lower overnight, with Technology seeing the most selling, followed by Discretionary and Energy stocks. Staples were the only stocks to rise on average after a strong report from Walmart.

Technically, the SP500 fell back towards the longer-term uptrend line, which sits around 4,960 index points, and it showed signs of holding this level overnight; this trend line would have to break before further selling looks likely. The index also recently held below the all-time high resistance level around 5,040 index points and the index would have to close above this level before further gains will look likely.

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