The XJO is expected to edge lower on open this morning following a small pullback in the U.S last night and their flat futures this morning.
Yesterday, we could not keep any positivity in our market as we gave up all our intraday gains to finish slightly lower. This was despite GDP numbers coming in much worse than expected which one would have thought may help alleviate rate hike worries. It seems ripples from Tuesday’s hike are still moving through our market. We finished pretty much on the 200 day MA as the market finds comfort consolidating between it and the 50 day MA. The market is also secured by the broader pennant pattern and key levels of support nearby.
If the U.S does see some profit taking though, it feels like our market would take this as a good reason to break lower. 7,080 is the next support, and a break lower could look like a move down to roughly 7,000. However, our market has been consistently making lower peaks and troughs and so we may see a small retracement prior to reaching that level.
US Markets
US shares closed mostly lower overnight, with the SP500 and NASDAQ finishing in the red after selling in technology stocks. The value-based DOW JONES managed to close slightly in the green. Technology stocks saw notable selling, with Alphabet and Amazon each falling around four percent. There was a lack of major US economic data overnight, though an oil inventory read did show a modest draw-down in US stockpiles. Overall US markets remain near multi-month highs, but they are starting to look a bit toppy, with economic data to weaken and with the potential for more interest rate rises. We will get an update on rates when the Fed meets next week, though most are expecting them to hold off a rate rise until their July meeting.
Five of the eleven sector groups of the SP500 closed lower overnight, with technology and communications stocks seeing the most selling. Energy stocks saw the most buying, while Real Estate, Utilities, and Industrials stocks also rose strongly.
The SP500 is holding above the previous 4,200 resistance and is continuing the bullish move to the resistances at 4,300 – 4,320. The index has now tested 4,300 a few times and is so far holding below it; this will have to break before a bullish continuation looks likely.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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