The XJO is expected to open higher once again this morning following another strong move in the U.S overnight as they continue bask in the light of their recent low CPI reading.

However, the U.S is looking overbought in a few different metrics, and if they see some profit taking come in soon the our market will almost certainly follow suit. Recently, any bullish runs locally have been met with hard and indiscriminate selling. This is largely because our interest rate and inflation environment is quite different to the U.S. Where it is speculated they are to hit peaks rates soon, our market on the other hand is being signaled that interest rates are likely to remain higher for longer.

This morning’s open will break the tentative downtrend line, with a move straight to the next key resistance at roughly 7,280. It is hard to suggest that we will push through today unless U.S futures move hard into the green from their current slightly negative position.

Our expected move today will put us above both the 50, 100 and 200 day MAs. If we see profit taking come in next week, we should expect a retreat back to the comfort of these levels with the first stop being the 50 and 100 day MAs which have converged at roughly 7,200. When looking for trades, we could very well be in Bear Call territory, however you may want confirmation of a pullback first before jumping in.

US Markets

US shares closed higher again overnight, with each of the three major indices finishing in the green. US markets continued higher after breaking resistance levels the session before. The gains have come after US CPI data showed that inflation is cooling in the US, and that US interest rates may soon peak. Investors are still expecting the US Federal Reserve to lift rates later this month, but this could be the last US hike this tightening cycle. Overnight US jobless claims came in lower than expected as well, and producer prices grew by less than expected. US company earnings for the second quarter have also started to be released, with better than expected results from PepsiCo announced overnight. Tonight will see many major banking and finance companies report.

Nine of the eleven sector groups of the SP500 closed higher overnight, with Communications the strongest performers, followed by Technology, and Discretionary stocks. Energy stocks were the only ones to close notably lower.

The SP500 broke above the key resistance at 4,450 on Wednesday night and overnight it continued higher to the next resistance level at approximately 4,510 index points. The index continues to look bullish however, so don’t be surprised to see prices continue higher from here. The next key level beyond this point is 4,600. The recently broken 4,450 level will now be expected to act as support.

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