The XJO is expected to open lower this morning following a strong pullback in the U.S overnight. Their futures are flat.
The inevitable pullback happened last night in no uncertain terms. It is hard to suggest this is the result of anything serious or a genuine change in trend, but rather some well overdue profit taking after a stella run over the past month or so. The pullback will of course flow into our market this morning, with our expected open at roughly 7,480. Don’t be surprised if selling persists throughout our session especially if the U.S futures herald further pullbacks tonight. Furthermore, 7,450 is the next key support so it seems likely we test it at some point today. If things worsen, then 7,380 to 7,400 is the next key level beyond that. There is also an accelerated uptrend line that comes into play around these levels (7,400 – 7,450) which may help our market stem the bleeding.
Pullbacks are healthy. They help uptrends strengthen and be sustainable over longer periods of time. There is no good reason at this stage to suggest that once profit taking has come in and the trend has shallowed to something reasonable, that buying won’t return with gusto. Participants who missed out on the current run and didn’t want to buy near the top of the range are likely primed to hit the buy button when the time seems right.
It seems the Santa rally came in early, however with the current pullback there is an argument to suggest that a base will form for another run before the year is out. On the other hand, volume is lighter over the holiday period, and we could see some drifting before people return in the new year.
US Markets
US shares fell strongly overnight after the recent extreme strength switched to selling, as investors took profits. Such a move shouldn’t have been too unexpected, given that prices have been on a ridiculous upwards movement since the end of October. The selling doesn’t seem to be linked to any event, news, or data release. Overnight US economic data showed slightly stronger US home sales than expected, while there was a much bigger than expected build-up in US oil inventories. Tonight there isn’t much in the way of major US economic data, though we will see a jobless claims report, as well as a Q3 GDP revision.
Every major sector of the SP500 closed lower overnight, with Materials, Technology, Healthcare, Industrials, Discretionary, Financials, Utilities, and Staples stocks all faring poorly.
Technically, the SP500 is on a very strong upwards movement but so far it has done so without any troughs. The selling overnight points to the likelihood that the index will now record a (higher) trough, which could allow it to eventually continue higher. In terms of where the higher trough will occur, the overnight close at 4,700 is a potential level, and perhaps 4,640 would be the next potential level if that breaks. Overall the momentum remains to the upside and we would expect an eventual rise to the all-time high around 4,800.
Want to learn how to trade?
The team at TradersCircle/Emerald Financial have released a free online stock market education course, click here to enrol and get started.
Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
Latest posts by Karo Cornips (see all)
- XJO to open flat with US markets back around resistance - September 2, 2024
- US markets close lower ahead of NVIDIA report, which disappoints - August 29, 2024
- Investors take pause ahead of key NVIDIA report - August 28, 2024
Leave a Comment
You must be logged in to post a comment.