The XJO is expected to edge higher on open this morning despite another night of indecisive trading in the U.S which saw their market give up all their intraday gains to finish flat. Their futures are also flat.
We should test key resistance at 7,350 today, but to push through we will need U.S futures to rally harder during our session. Furthermore, with key US CPI data tonight, it would make sense for our market to pause at resistance or even rebound off it and not commit too hard heading into such a key event.
If we do fail here, then 7,250 to 7,200 marks the next key support, which is also roughly where the 50 and 100 day MAs come in.
US Markets
US shares closed mostly flat to lower overnight, with the SP500 and NASDAQ finishing slightly lower, while the DOW JONES managed to grind out a small gain. US markets were largely unchanged ahead of tonight’s US CPI reading. CPI growth is expected to continue to decline, which will further promote the narrative that interest rates will peak soon, which could be a positive for the market. However, unexpectedly high CPI growth will likely send markets lower. Investors believe that there will only be one or maybe two more rate rises from the US Federal Reserve and this reading will go some way towards shaping the narrative moving forwards.
Nine of the eleven sector groups of the SP500 closed higher overnight, with only Technology stocks seeing notable selling of just over 1%. Energy, Financials, and Materials stocks all saw moderate success.
The S&P500 remains on a medium-term uptrend line, though it has failed to meaningfully advance across the past week. There is potentially some local resistance forming around 4,125 that will have to break before the index looks like heading to the next major level of 4,200. Should the index fall from here and break below the key support of 4,075, we are likely to see a move back to roughly 4,000.
Tonight’s key CPI data will be followed later in the session by minutes from the previous Fed meeting, which will also help to shape the narrative around interest rate movements at the next few meetings.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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