SP500 flat at 5,000, XJO to open flat

The XJO is expected to open flat this morning following an uneventful night of trading in the U.S. Their futures are flat this morning.

With little to go off last night, our market is likely in no mood to make any real decisions today. Key Asian markets are in the red this morning, so with no leads from the U.S, we may feel inclined to follow them lower, especially with indecision often leading to weakness.

The past week of trading has seen each of our sessions give up much of the intraday gains and losses, further showing that our market really doesn’t know what to do here. There are plenty of good reasons for a sell off, however the U.S maintains their strength. Perhaps we are waiting for the reporting season to confirm the expected retraction. Perhaps the expected retraction is giving hope of earlier rate cuts. Its hard to say, only time will tell at this stage.

An overbought market is now not looking so overbought, with consolidation normalising short-term indicators like the stochastic. Admittedly our banks still look overbought. What felt like a clear environment for an argument for a pullback about a week ago, is hard to say with as much conviction now.

US Markets

US shares were relatively flat overnight with the SP500 briefly touching the 5,000 point level before pulling back. There was a lack of major US economic data overnight, though we did see fewer than expected US jobless claims, which points to continued strength in the US labour market. There is again a lack of major US economic data overnight, so don’t be surprised if markets hold around current levels into next week. Next Tuesday night we will see US CPI (inflation) data for January, which will be the next major test for US shares. Should inflation continue to coming in a bit hotter than expected, we could see some selling in markets.

Six of the eleven sector groups of the SP500 closed higher overnight, with Energy the strongest performer, followed by Real Estate. Utilities saw the most selling, followed by financials stocks.

Technically, the SP500 held around the milestone 5,000 point level, though was unable to break through. We will need to see if 5,000 acts as a resistance level, as the market sometimes stalls at these milestone numbers. Should the index fall from here, the recent trough at 4,850 will need to break before further selling looks likely.

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