Shares rebound, retracing some of the prior sessions’ losses

The XJO is expected to edge higher on open this morning following a small turn around in the U.S last night which saw their market retake much of the previous session’s losses. Their futures are flat.

Yesterday we didn’t fall has as much as what our futures were posting this time yesterday morning. Indeed, by open our futures had optimistically regained some ground and with U.S futures moving into the green during our session, the overall falls were rather mild by close. Today, we should see a small recovery like in the U.S, retaking most (if not all) yesterday’s losses. Of course, once again, we will almost certainly be directed by U.S futures, with our market following their direction should they push one way or the other during our session.

It is genuinely surprising to see the profit taking being immediately met with buying again. Considering the steepness of the trend and how overbought markets are in the short-term, it would have been reasonable to expect far more of a pullback. We may still see it, but the underlying strength in markets has clearly not faded yet. We may see a consolidation here as the U.S has shown a willingness to dog-leg higher rather than create a typical higher peak and trough.

Expect the holiday period to remain quite over the next few days. Keep in mind Monday and Tuesday are both public holidays. Stay safe, and have a wonderful holiday.

US Markets

US markets rebounded overnight, retracing most but not all of Wednesday’s losses. Economic data showed fewer than expected jobless claims, but also that estimates of third quarter US economic growth were revised lower. Overall prices still have extremely strong upwards momentum, but this momentum may be starting to slow, with prices starting to look quite overbought. US shares are also at or near all-time highs, which could be a level that investors look to take profits.

Every major sector of the SP500 closed higher overnight, with Discretionary, Healthcare, Communications, and Technology the strongest performers.

Technically, the SP500 is on a very strong upwards movement but so far it has done so without any troughs. The selling on Wednesday points to the likelihood that the index will now record a (higher) trough, which could allow it to eventually continue higher. In terms of where the higher trough will occur, the recent close at 4,700 is a potential level, and perhaps 4,640 would be the next potential level if that breaks. Overall the momentum remains to the upside and we would expect an eventual rise to the all-time high around 4,800.

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