The XJO is expected to edge lower on open following a flat session in the U.S overnight and their negative futures this morning.
Markets continue to consolidate at the top of the trading range. We have likely broken the ascending triangle with sideward movement as we grind along key resistance/support near 7,350.
The XVI and VIX are getting to levels where we would expect a bounce in volatility soon. This is often on the back of a sharp fall, so be mindful that we may be shaping up for a pullback soon – especially considering our consolidation at the top of the range at a key level.
US Markets
US shares closed mostly lower on average overnight, with the S&P500 and DOW JONES finishing in the red, and only the NASDAQ finishing slightly positive. There was again a lack of major US economic reporting, so instead investors focused on company earnings reporting. So far, the season has been mostly positive, but there have been a few notable misses, which has stopped share markets from progressing this week. After the US market closed, Tesla reported slightly worse than expected results, which has sent the share price around five percent lower in after market trading. If the earnings season continues at the same rate of beats and losses as at present, US markets will likely hold around their highs until the next indication on interest rates and inflation. Tonight we will see comments from several Federal Reserve members, which could influence the last days of movement this week.
Only four of the eleven sector groups of the SP500 closed higher overnight, with only Utilities managing notable gains. Most other sectors were fairly flat, though there was some selling in Communications stocks.
After little movement across the past few sessions, the S&P500 remains on its medium-term uptrend line, and the index continues to looks cautiously bullish. With the index continuing to hold the trendline, it looks likely to continue higher to the next major resistance level of 4,200. Should the index fall from here, it will have to break the uptrend line, then the support at 4,075, before it will look like falling further.
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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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