The XJO is expected to move lower on open this morning following both a meek move lower in the U.S last night and their soft futures this morning.

Our market likely sees the U.S unwilling to break their key resistance and make new highs as good enough reason to extend yesterday’s profit taking. In doing so, we are also continuing the rebound from our own key resistance at roughly 7,300. Yesterday we tested a very short-term uptrend line, and this morning we will likely break it. Furthermore, if U.S futures remain red through our session, we will of course likely hold onto this morning’s expected losses.

We are expected to open right near the convergence of the 50 and 100 day MA which come in around 7,220. These MAs are a point of comfort for the market where it can be neither considered overbought nor oversold in both the medium and short-term (by these indicators alone). Whilst our market sits and waits to see both how the recent interest rate decision continues to be digested, and how the U.S trades, it makes sense we do it from a point of equilibrium.

Being stuck in the middle of the channel and at a point of safety means that the next broader move to the top or bottom of the channel is hard to discern. We will need to see how the U.S moves, but pressure at this stage still feels to the downside.

US Markets

US shares closed fairly flat overnight, with prices drifting slightly lower. This came after the release of the June Federal Reserve meeting minutes, which again suggested that the Fed is likely to raise rates again at the end of this month. Overall, most economists are predicting two more rate rises from the Fed this cycle. What is less agreed upon by economists, is whether there will be a recession in the US later this year or early next. US economic data continues to come in fairly strong, leading many to predict that the US could avoid a recession this time around. One key piece of data that could cause changes to recession and interest rate forecasts will come tomorrow night with the release of US unemployment numbers for June, expect to see movement following this announcement.

Seven of the eleven sector groups of the SP500 closed lower overnight, with Materials stocks the weakest performers by far. Communications and Utilities stocks saw the most buying.

The SP500 is holdimg below the key resistance at 4,450. This level would have to break convincingly for further gains to look likely. Overall the index remains on a strong uptrend so there is every chance this level does break. Should the index resume falling from here, the recently broken resistance of 4,300 could act as support against a downside move. This level is also roughly where the uptrend line sits, which could also act as support.

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