Markets edge higher as US Fed contemplates holding interest rates

The XJO is expected to edge higher on open following a small rally in the U.S overnight and their positive futures this morning.

Yesterday we held our gains, and our open this morning indicates we should move back towards 7,200 and test it. It seems unlikely at this stage that we will push through today, unless U.S futures are strong enough that our market starts to price in an expected higher in their market tonight.

At this stage, both markets look like they are simply consolidating at the bottom of the range, with ours clearly being between 7,100 and 7,200. We would typically expect this range to hold until we see evidence otherwise.

The pressure in the medium term remains bearish, with more headwinds for the market than tailwinds persisting. In the short-term however, the market may still decide to relief rally.

US Markets

US shares closed higher overnight, with each of the three major indices finishing firmly in the green. Buying was fairly broad-based, with each index rising roughly the same amount. There was a lack of major US economic data overnight, so instead prices seemed to continue their bullish momentum from Friday. Some analysts are suggesting that this is because Fed Chair Jerome Powell favoured holding rates in his speech on Friday, but his comments could definitely be seen as suggesting more rate rises unless data starts to weaken and inflation continues to fall. Tonight wont see much US data released, and perhaps US shares will continue to drift higher in the absence, but Wednesday night and Thursday night will see plenty.

Ten of the eleven sector groups of the SP500 closed higher overnight, with only Utilities finishing (slightly) lower. Communications, Technology, and Industrial stocks saw the most buying.

Technically, the SP500 continued higher overnight but it held below the recent peak around 4,450, this would be the resistance level to break before further gains will look likely. Should we fall from here, the recent lows at roughly 4,330 would be the support level to watch.

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