The XJO is expected to open lower this morning following a decent pullback in the U.S overnight which saw their market break their key support. Their futures have edged into the green which at least gives some indication that the selling has not persisted.

We should open near 7,000 support, which is roughly the bottom of the recent messy trading range for our whippy market. We shouldn’t be surprised if our market gives-up and continues the decent, overshooting the U.S and moving to 6,950. What may decide if we hold, rebound, or continue selling is unemployment numbers today at 11:30 (AEDT). Our market will want to see unemployment higher, though it is expected to come in unchanged from the previous reading.

The narrative of higher-for-longer rates is being entrenched, and markets are also starting to accept the fact there could easily be another rate rise before we hit peak rates over the next six months. This should translate to a retest of 6,900, however we make take a while to get down there with how whippy markets have been lately.

US Markets

US shares fell strongly overnight, with each of the three major indices closing firmly in the red. The selling came after a series of speeches from Federal Reserve members, which suggested that interest rates will remain high “for some time” in order to bring inflation down. US government bond yields jumped strongly in the overnight session, with their yield curve reaching its highest levels since 2007. This is not good for share markets, markets want to see lower yields and interest rates turning around. With yields continuing to push higher, we would expect to see further stock market selling. Tomorrow morning we will see more speeches from Federal Reserve members, including Chair Jerome Powell himself. Bullish investors will be hoping that these speeches will restore calm to the bond and stock markets.

Nine of the eleven sector groups of the SP500 closed lower overnight, with Materials, Industrials, and Discretionary stocks the worst performers. Only Energy stocks managed a notable gain.

Technically, the SP500 broke below a potential support level at 4,330, and overall looks to have set a lower peak across the past week. The index is on a downwards move and now looks like heading back towards the 200-day moving average, which is also roughly where the longer-term uptrend line sits, currently around 4,250.

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