The XJO is expected to open lower this morning following a pullback in the U.S overnight. Their CPI came in stronger than expected and though their reaction last night was visceral, they managed to retake some intraday losses into the close whilst rebounding from their uptrend line. Furthermore, their futures are flat this morning, rather indicating fear selling.

It feels like we have been waiting for this pullback. The strong CPI reading came at a time where their market was already overbought. One would hope that their strong fall will not smash into our market, considering our rally from our October lows was only half of what they achieved. Indeed, recently our market has been trepidatiously tracking sideward, unwilling to post further fresh highs, partly because we were expecting a mean reversion from the U.S. Now that we have it, hopefully we can hold some ground considering we are not coming off from as higher base.

We should open near 7,550, which is also where the uptrend line comes in. If we sniff further falls in the U.S futures, expect our market to sort of give up and move towards 7,500 to 7,450, which is also where the 50-day MA comes in.

Looking forward, there is a strong argument that markets should continue to come off from here. The hopes of a March U.S rate cut should have all been but dashed, and it would be hard not to expect that to continue to be priced in. Of course, the U.S has shown to remain vigilant in the face of adversity, and could easily see a small rebound, though our own market is likely to remain skeptical.

US Markets

US shares closed firmly lower overnight, with each of the three major indices falling. This came after US CPI for January came in stronger than expected, which has caused investors to reconsider whether rate cuts will be coming as soon as first expected. US CPI rebounded in January as oil prices pushed up, as well as the cost of financial services amongst other items. Whereas at the start of the year, investors were confident the Fed would begin rate cuts in March, the recently strong data has pushed most to now expect the first cut in June. Whether or not rates will be cut in June is impossible to say, and if data continues at the current strength, they may be pushed out even further.

Every major sector of the SP500 closed lower overnight, with Healthcare seeing the least selling, followed by Staples stocks. Materials, Technology, Utilities, Real Estate, and Discretionary stocks saw the most selling, though realistically every sector saw strong selling.

Technically, the SP500 broke back down from the recent highs, falling back towards the uptrend line which it held overnight. The uptrend line currently sits around 4,925, and this level would have to break before further selling looks likely, should it break, the first downside target should be the 4,800. Should the index bounce from this level, the recent highs above 5,000 would be the mark to beat before further gains will look likely.

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