The XJO is expected to open flat this morning despite another small pullback in the U.S last night and their flat futures this morning.
Our market is likely not to do much today unless we see strong movement in overseas markets and/or U.S futures during our session.
Yesterday we had a mild pullback to sit between key resistance at roughly 7,370 and key support at roughly 7,280.
Last night Powell testified, and he is expected to again tonight. This has a good chance of moving markets over the coming days, especially when coupled with existing home sales and PMI data from the U.S also due tomorrow. How this will translate to our market is uncertain. In the short-term we assume continued consolidation for now.
US Markets
US shares closed mostly lower overnight, with the tech-heavy NASDAQ falling strongly, while the SP500 saw moderate selling, and the DOW JONES closed flat. Growth and tech shares saw the most selling after Fed Chair Jerome Powell reiterated in his testimony to Congress that Fed members expect more interest rate rises this year. There was also talk about the upcoming economic downturn, with the average economist suggesting a 66 percent chance of a US recession within the next twelve months. In general, US investors are less hawkish than Fed Chair Powell, with many believing that peak rates are already here, while many others believe just one more rate rise will occur – these dovish investors are likely the reason for the strong US rally across the past month.
Five of the eleven sector groups of the SP500 closed lower overnight, with Technology, Communications, and Discretionary stocks seeing the most selling. Energy stocks saw the most buying after a drawdown in US oil inventories, which pushed oil prices higher.
Technically, the SP500 remains on a strong uptrend at the moment, with prices powering higher. The index may have found some resistance around 4,450 on Friday however, so this level will have to break for further gains to look likely. Should some profit taking continue, the recently broken 4,300 resistance level may act as support on a downside move.
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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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