Tech continues to sell while other US shares hold, XJO to open higher

The XJO is expected to edge higher on open this morning despite a small pullback in the U.S last night. Their futures are in the green.

U.S tech was the main contributor to their falls which is not as well represented in our market. Coupled with our likely overextension to the downside yesterday, it helps explain our slight rally in the face of further selling in the U.S overnight.

We broke through 7,900 key support yesterday. This morning we should test it as resistance. If U.S futures remain positive during our session, our market may manage to push though. At this stage though, we should expect it to hold.

There was a clear pennant forming with a short-term underlying uptrend line meeting a countertrend line from our most recent major peak. However, we broke it yesterday, breaking the uptrend line in favor of the countertrend. Our move higher this morning will test the countertrend line alongside the key resistance at 7,900 – making it possibly harder for our market to push through today.

US Markets

US shares closed mostly lower again overnight, with the SP500 and NASDAQ finishing in the red after further selling in tech stocks, while the DOW JONES managed a small gain. In general the movements reflected a shift away from the tech space, with profit taking continuing after their extremely positive year. Overnight US economic data continued to be positive, with the 2nd Quarter GDP revision coming in stronger than expected, while there were also fewer jobless claims than expected. However, prices did grow slightly stronger than expected, though the market remains happy to predict two rate cuts this year. In general, the market has everything it could ask for at the moment (despite prices and valuations being ludicrous), and so don’t be surprised to see buying resume soon. We will see the full US PCE Price data report tonight – the Fed’s chosen measure of inflation – markets will want to see a low number here before returning to rallying.

Four of the eleven sectors of the SP500 closed higher overnight, with Energy the strongest performer, followed by Industrials stocks. Communications stocks saw the most selling, followed by Technology stocks and Utilities.

Technically, the SP500 recently broke below the potential support level around 5,500 (the previous all-time high resistance). With a break below 5,500, we could see an eventual move all the way back towards 5,250. However, overall the market remains in an uptrend and we would could see a higher trough than the one at 5,250 (perhaps around 5,320). To the upside, the 5,500 level breaking would indicate further upwards movement.

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