The XJO is expected to open flat this morning following a meek rise in the U.S overnight. Their futures have edged into the green.
We were expecting more of a reaction from the U.S last night considering their CPI numbers came in slightly higher than expected overall. Our hunch is they will have a delayed reaction, and likely to the downside now that the probability of another rate rise has slightly increased. Furthermore, even if the Fed holds, last night’s CPI by the very least signals that rates will remain high for longer.
Our market will likely remain in the recent consolidation range until we see the U.S move one way or the other. Perhaps we will see the extent of it next week.
Today we have local unemployment data. From a market perspective, we want to see these numbers come in higher than expected. Depending on how they come in this morning at 11:30am, our market could either break lower or head back towards the top of the recent range at 7,200.
US Markets
US shares closed fairly flat overnight, after US CPI for August came in higher than expected and higher than July’s numbers. The data was only slightly stronger than expectations, but that was enough to increase the odds of another US rate rise to around 50% according to the Fed Watch tool (up from about 40%). Overall the data looked more negative than positive for US shares, though it doesn’t seem like it was enough to send prices lower – at least not initially. We will also see US retail sales tonight, and if they come out strong, we could see the odds being tipped over the edge and another rate rise might become more likely than not – something that is likely to send US prices lower.
Six of the eleven sector groups of the SP500 closed higher overnight, with Utilities the strongest performers, followed by Discretionary stocks. Real Estate and Energy stocks saw the most selling.
Technically, the SP500 is holding above the 4,450 support level, but it is struggling to bounce off this level. Should the index bounce from here, it should head towards the resistance at 4,525. Should the index break below the 4,450 support, we would expect selling back towards the support at 4,350.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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