Markets stall out around their peaks

The XJO is expected to open flat this morning despite a small pullback in the in the U.S overnight. Their futures are flat this morning.

We continue to trade in an ascending triangle, and possibly a pennant pattern. Yesterday we stalled at possibly a countertrend line. Regardless, the uptrend line comes in just above 7,600, and the key resistance remains 7,700. The countertrend line comes in at roughly 7,675 – so in essence our market is trading right near the points.

The reduced volatility as we ping pong off of these levels would indicate at this stage that we are likely to continue breaking sideward, and therefore the uptrend line. 7,700 seems likely to hold at this stage, especially with the U.S giving signals overnight that it might have a small pullback, which would also keep our market subdued.

Of course, the opposite could be equally true – we won’t know until the triangle/s breaks. The U.S has strong bullish undercurrents, and if they keep making fresh highs, our market will likely follow suit (albeit perhaps reluctantly). We would likely need to see our miners stabalise, which have continued to lament with excessive falls in iron ore. Key miners like BHP and RIO are near key and historic support, so we could see a rebound in the coming weeks.

US Markets

US shares closed lower overnight, with each of the three major indices finishing in the red. There was a lack of major US economic data overnight, so instead prices continued to pull back after stalling on Friday. Perhaps importantly to note, prices finished at their lows of the session, perhaps suggesting a turnaround in the short-term momentum. We will see some major US data later this week with GDP being reported on Wednesday night, followed by a PCE price reading on Thursday night. According to the Federal Reserve, PCE is their preferred measure of inflation, so this reading could be important in the timing of rate cuts moving forwards.

Only three of the eleven sector groups of the SP500 closed higher overnight, with Energy seeing the greatest (but still modest) gains. Utilities saw the most selling, followed by Communications, and Real Estate stocks.

The SP500 continued to reverse overnight after reaching intra-day high of 5,100 on Friday. The index may be showing a candlestick reversal pattern up the top of the range, which could suggest a pullback back towards the longer-term uptrend line and the potential support level at 5,000. Should the index reverse and push higher, it would need to break above 5,100 for further gains to look likely.

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