The XJO is expected to edge lower on open this morning following a similar move from the U.S last night and their flat futures this morning. Markets are simply quiet heading into the CPI reading tonight in the U.S.

Locally, we had the federal budget released last night. We don’t see this affecting our market in the short term, especially when the news is likely to be eclipsed by a U.S move on the back of their CPI reading tonight.

7,150 to 7,200 is the next clear support, with 7,100 being the next clear target if they fail. 7,300 to 7,350 remains clear resistance with 7,400 the next clear target if we push through. We are roughly trading in the middle of the range, with little indication as to the next move for markets. However, it feels like we would need to see impressive numbers tonight for markets not to fall or go sidewards to lower.

US Markets

US shares closed moderately lower overnight, with price drifting lower ahead of tonight’s key inflation data. Tonight we will see US CPI growth for April, which is expected to show inflation remaining at elevated levels. There is definitely some risk to the market at this reading, as if inflation stops falling, further interest rate rises will start to be priced in, which likely means market selling. Also plaguing US markets is discussions around the US government debt ceiling, which will be reaching in under a month’s time. Should the ceiling not be extended, its possible we could see another government shutdown, which will also likely trigger market selling. From a bullish perspective, a lower than expected CPI reading could force markets higher.

Eight of the eleven sectors of the SP500 closed lower overnight, with Materials, Technology, and Healthcare seeing the worst of the selling. Most other sectors closed relatively flat.

The SP500 is remains in a bit of no man’s land, above the 4,050 as a support level from last week last week, but below the 4,170-resistance level. Its not at all clear which way the market wants to break, but should the 4,170 level break, the next upside target is very close by at the 4,200 resistance level. Should 4,050 break to the downside, the next target would be the 4,000 point level.