The XJO is expected to extend yesterday’s gains this morning despite a strong pullback in the U.S overnight. Their futures are in the green.

CPI came in softer than expected, yet their market still sold down. This is perhaps due to a rotation out of the large companies that have seen the lion share of the recent growth, and into smaller cap stocks that would benefit from lower interest rates. It could also simply be some profit taking after such a strong bull run.

Regardless, the news looks positive, and our market seems confident that there are blue skies ahead for the U.S, and therefore feels comfortable moving higher this morning.

Yesterday we tested our all-time high resistance level at roughly 7,900 but rebounded off it intraday. We managed to hold most our gains though. This morning, we should retest it. Our futures have us pushing through resistance, but come market it open it may simply flirt with it.

In recent history, when our market has made fresh all-time highs, we have either pulled back immediately, or consolidated for a few days before doing so. Therefore, it would be hard to expect our market to make any significant ground from here in the short-term, especially with its sidewards nature of late.

US Markets

US shares closed mostly lower overnight with strong selling in technology stocks dragging the SP500 and NASDAQ lower, while the majority of sectors closed higher. US CPI data overnight came in lower than expected, solidifying the view that rate cuts are coming soon from the Federal Reserve. This led to a drop in bond yields overnight, which is a positive for the market. On top of this, there were fewer US jobless claims than expected overnight, adding to the view that inflation will come down without a strong economic downturn. The next major event for US markets will be the company reporting season, which kicks off tonight with several major banks reporting results. It is now up to these reporting companies to achieve the earnings to justify the current very high prices for shares.

Seven of the eleven sector groups of the SP500 closed higher overnight, with Real Estate and Utilities, the most rate sensitive stocks, the strongest performers. Most other sectors saw gains, while strong selling was seen in Technology and Communications shares, which had perhaps overextended on the recent strong push higher.

Want to learn how to trade?

The team at TradersCircle/Emerald Financial have released a free online stock market education course, click here to enrol and get started.