The XJO is expected to rally on open this morning following a strong recovery in the U.S last night. Their futures have also edged into the green which at least indicates that their strong buying isn’t being immediately met with profit taking. However, they stalled at key resistance last night, so we need to be mindful that they could fail again.
Yesterday we managed to finish slightly in the green and pretty much bang on the 200 day MA. We are expected to rally to 7,150 this morning. This has been a key support lately, and it could very well act as a resistance. Don’t be surprised if our market continues to hang around the 200 day MA (albeit with perhaps volatility) whilst we wait for the U.S to break their ascending triangle. Furthermore, our market still looks like it is trading in a broad pennant pattern. If we do manage to recover further, then our next target is back at 7,200 which is also where the 50 day MA comes in.
US shares closed firmly higher overnight as prices reacted to the passing of the debt ceiling deal through congress. The deal will still have to pass the senate however, who are expected to vote on as early as today on the bill. This rally also comes on the back of weak economic data, with US manufacturing data coming in weaker than expected for May, while labor costs fell. This weak data could be seen a deflationary, which lowers the chance of more rate rises. Jobs data from the US overnight was more positive, with Jobless claims and Jobs created each better than expected. US shares look pretty strong at the moment and appear in an overall upwards movement.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Technology, Industrials, and Materials stocks the strongest performers. Utilities were the only stocks to close notably lower.
The SP500 pushed through the 4,200 resistance overnight and now looks bullish towards the next major levels around 4,300. With the 4,200 breaking as resistance, it is likely to act as support to any downside move.
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