The XJO is expected to open higher this morning following a strong night of gains which saw the U.S once again finish in fresh all-time highs. Their futures are flat.

We should open near 7,900, roughly our all-time high resistance. It would be hard to suggest that we will break through today, especially when we have U.S CPI tonight. This could be a classic buy the rumor, sell the fact scenario, as it seems like the U.S is due for a pullback and the recent bull run is built on hope of a couple of rate cuts this year. If inflation isn’t as positive to support that narrative it seems reasonable to expect some profit taking.

If our market does break higher, it is typically within our nature to either pullback almost immediately, or consolidate for a few days first. Furthermore, it feels like the only real reason we are testing all-time highs is because the U.S is dragging us higher. Our own situation is not as favorable as the U.S and so if they do retrace, our market should have no problem selling back down.

US Markets

US shares displayed unbelievable strength as they continued further into all-time highs. It was the sixth all-time high close in a row for the SP500 index, and it came after Powell stated in his testimony to Congress overnight that “I do have some confidence” of inflation returning to the 2 percent target rate. This boosts the belief in the potential for two rate cuts from the FED this year, with most expecting the cuts to start in September. Tonight we will get an update on the inflation story with US CPI for June, it is expected to remain somewhat sticky at this reading, so its hard to say what the market response will be. Following the reading, US company earnings reporting will start in earnest on Friday night, with many of the biggest US banks reporting their results.

All eleven sector groups of the SP500 closed higher overnight, with Technology leading the charge, followed by Materials. Just about every other sector saw notable buying however.

Technically, the SP500 is on an overall longer-term uptrend and it closed above the previous resistance at 5,500 last week. This suggests the buying should continue and its hard to say where it will stall. Should we see selling, the previous resistance at 5,375 is now likely to act as support; should it break, we are likely to see further selling.

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