The XJO is expected to open lower this morning following another night of selling in the U.S. Their futures are in the green.

It’s a similar scenario we were looking at yesterday morning pre-open, where we have seen the U.S sell down overnight but their futures are marginally in the green. The difference is, the selldown was more aggressive last night, and our market is having a more sever response.

Yesterday we pulled back to give up just over half of the previous session’s gains – a fairly mute response considering how we would typically respond to a U.S pullback in recent history. We have been high on the bull run, enjoying the pump, and even with signs of consolidation, wanted to keep the party going. Now that the U.S has confirmed the pullback (which is likely to be some simple mean reversion and profit taking) our obnoxious bravado has all but fled. We have sobered up.

We should open near 7,950, with the previous all-time high at 7,900 the next key level of support. With U.S futures mildly in the green, we may price all the falls in on open, and our market may make a small recovery intraday. 8,050 is now the next key level of resistance. It may be argued it is higher, but the open and closes of the peaks seam to be around 8,050 and our market seems to like whole numbers. Regardless, we now have a range again, but we will need to wait and see if we confirm it or set new supports or resistances. We have short memories, so let’s not forget the nature of our market is often to trade sidewards in a range – especially after a bull or bear run.

US Markets

US shares closed lower overnight, the second day of losses for the SP500 and NASDAQ. Overall, the move looks to be a bit of profit taking after an extremely strong bullish run. In general, US shares have had everything they could ask for with inflation coming down and with the economy maintaining relative strength. Still, with prices currently extremely high, a profit taking pullback will likely occur at some point. US economic data overnight was also a little worse than expected, which does point towards a rate cut, but also highlights the risks of the economy slowing a dragging down earnings.

Only one of the eleven sector groups of the SP500 closed higher overnight, which was energy. Every other sector finished lower, with Healthcare the worst performer, followed by Financials, and Discretionary stocks.

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