Shares stall despite lower CPI

The XJO is expected to open lower this morning following a pullback in the U.S overnight. Their futures are also flat, providing little to no leads.

We had a big day of rallies yesterday. We blew through key resistance at 7,800 and 7,850, managing to finish the session by testing our all-time high resistance at roughly 7,900. The U.S was unable to hold strength overnight having themselves just made fresh highs in the previous session, and so our market will follow suit and rebound from key resistance.

7,850 could now act as support, which we should test this morning. Our market may feel compelled to selldown further if it doesn’t believe the U.S can commit to further gains in the short-term.

We tend to be a cynical market, where we need to see the U.S continue to rally before we get on board. Furthermore, our banks are starting to look overbought at stretched valuations. Our market would likely need to see the miners continue to move higher for us to make fresh highs, or even hold ground in the medium term.

US Markets

US shares closed lower overnight, with prices initially trading higher with the momentum of the night before, following the lower than expected CPI reading. However, shares are priced to absolute perfection and some profit taking perhaps crept in overnight. Overall, US markets have had pretty much everything they could ask for, with lower CPI likely suggesting that US rate cuts will be seen in the coming months. However, analysts are also expecting strong US corporate earnings an apparent contradiction to the expected economic weakening that would be needed to trigger rate cuts. Regardless, in the short-term, things remain looking quite positive for US markets.

Only one of the eleven sector groups of the SP500 closed higher overnight, which was the discretionary sector. Every other sector closed lower, with Discretionary and Materials the worst performing sectors.

Technically, the SP500 broke into fresh all-time highs on Wednesday, eclipsing the previous resistance around 5,260 index points. With a break of this level, we should see further upwards movement, but its hard to say where this could stall given these levels have never been seen before. To the downside, the previous resistance around 5,260 is likely to act as support.

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