The XJO is expected to fall this morning following both a strong pullback in the U.S overnight and their negative futures this morning.

Yesterday we set all-time highs once again, though we gave up most our intraday gains to finish near the open. This signal was the beginning of an evening star reversal pattern, and with this morning’s move we may complete it.

We are set to open near 7,975 at time of writing (though of course this could change come market open). This would wipe most the previous two sessions’ gains and put us back within the recent consolidation range.

Despite the red on the screen this morning, our market in particular has shown an eagerness to rise, and we shouldn’t assume that sentiment has suddenly left us. Indeed, it is the characteristic of an uptrend that we see higher peaks and troughs, and with this morning’s move we will have just created a higher peak.

It is reasonable to expect key support at roughly 7,850 to 7,900 to hold, as well the uptrend line which comes in at about 7,925. The 50 day MA also comes in at roughly 7,850, so if the uptrend line and support fails, this seems like a reasonable target for our market to pause and see how the U.S trades.

US Markets

US shares fell strongly overnight after economic data came in weaker than expected. US jobless claims were higher than expected, while manufacturing PMIs were weaker than expected. Overall the data points to an economic slowdown, which does support the case for interest rate cuts. In the past, markets have rallied up until the point of rate cuts before falling afterwards; it could be that some in the market are trying to get out ahead of time, given that the first rate cut is expected in September. Regardless, US markets are still in an overall uptrend so don’t be surprised to see dip buying at some point. After US markets closed, Apple and Amazon reported earnings, with a slight beat from Apple sending its share price modestly higher in aftermarket trading. Meanwhile Amazon missed on its result, and its shares were sharply lower aftermarket.

Five of the eleven sector groups of the SP500 closed higher overnight, with Utilities and Real Estate (interest rate sensitive sectors) closing higher. Technology stocks saw the most selling, followed by Energy, Discretionary, Industrials, and Financials stocks.

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