The XJO is expected to open higher this morning following a rebound in the U.S overnight. Their futures are flat this morning.

The U.S quite clearly rebounded from their uptrend line and we are set to do the same this morning. Yesterday we heralded the rebound, as we retook roughly half the intraday losses into the close. It looks like we also roughly bounced off of the 50 day MA, all positive signs for markets to continue higher. However, there is no doubt that there is an undercurrent building. It was fair to expect further pullbacks yesterday, however with the rebound, we would take it as the first sign of a crack as the bullish momentum is still in the driver’s seat.

We should open near 7,600, back at the middle of our consolidation range as we shed yesterday’s volatility. With the U.S clearly showing a rebound, we may feel comfortable making further gains towards 7,650 today.

US Markets

US shares closed higher overnight, with prices retracing much of the selling of the prior session. It seems that even higher inflation and interest rate cuts being pushed out can’t shake the current extremely strong bullish movement; at least not yet, nothing can rise for ever. Historically, such extreme exuberance, where prices continue to rise even in the face of seemingly bad news, sometimes ends when prices end up falling on good news. The US is also being held up by extremely strong share price performance from the ‘Magnificent Seven’ (now the magnificent six after Tesla’s downfall), with these companies account for approximately 50 per cent of the markets year-on-year earnings per share growth, while the other 493 companies in the S&P index have experienced -10 percent growth. One of these companies, NVIDIA, will report earnings on the 21st of February, given its recent crazy rally, this event presents a risk for the market.

Nine of the eleven sector groups of the SP500 closed higher overnight, with Industrials, Communications, Technology, and Discretionary stocks the strongest performers. Energy and Staples stocks were the only stocks to close lower on average.

Technically, the SP500 bounced from the uptrend line overnight, which currently sits around 4,925. The recent highs around 5,050 are now the mark to beat before further gains look likely, should this level hold as resistance, it would be a bearish sign, signalling a move back to 4,800. Should the index break above 5,050, we should see further upwards movement.

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