The XJO is expected to edge lower on open this morning following a marginal pullback in the U.S overnight. Their futures sit flat.

Technically our market looks like it is trading in a small ascending triangle. There is an uptrend line that has formed since the lows of roughly 6,750 and comes in roughly at present day. Of course, there is a key level of resistance at roughly 7,100 we have been flirting with the past week or so. We would likely expect the ascending triangle to break in the direction of the underlying uptrend, which is characterised by not only the uptrend line, but also the higher peaks and troughs we have managed to create since our lows. With the broader downtrend line having broken a week or so ago, our market is showing the right ingredients for a change in trend.

However, the U.S is trading at resistance, and near their all-time highs. Our market is reluctantly following along, pricing in less than half of their extraordinary run. If they profit take, our market will likely feel less inclined to continue the uptrend. This does not necessarily translate to a move back down to our lows, but perhaps a subdued sideward market once again. At this stage, this seems more likely with any weakness seen in the U.S.

US Markets

US shares closed lower overnight as shares saw profit taking after the recent strongly bullish run. Shares with the release of the Federal Reserve meeting minutes, which showed that despite interest rates unlikely to go any higher, Fed members see them remaining at elevated levels for a long time. Still prices did close around the highs of the session, with prices seemingly unwilling to fall too far. US markets have enjoyed strong bullish momentum recently, so a breather and perhaps a small pull back shouldn’t be too unexpected, as the current rate of gains is simply unsustainable.

Four of the eleven sector groups of the SP500 closed higher overnight, with Healthcare the strongest performers, followed by Materials stocks. Technology and Real Estate stocks saw the most selling.

Technically, the SP500 is on a super-strong short-term uptrend that has formed since the start of November. The index recently broke above potential resistance around 4,520, and with this level breaking it looks likely that the index will continue higher to the 4,600 level. Should the index fall from here, it will have to break below 4,520 before further selling will look likely.

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