The XJO is expected to open lower this morning following a pullback in the U.S overnight. Their futures are flat.
Yesterday some secondary CPI data came out slightly higher than expected. In response our market dipped, however we managed to retake all our intraday losses to finish flat. The stronger than expected CPI would mean that interest rate cuts are likely to be pushed further out, which means it will be hard for our RBA to follow the U.S Fed which plans for cuts this year. It even increases the chances that the RBA rases rates – all of which is negative for our market.
Regardless, our intraday retracement clearly shows that positive sentiment underpins our market enough to continue following the sidewards U.S.
The pullback overnight in the U.S will flow into our market this morning as we are expected to open near 8,025. However, their pullback could easily be just the continuation of their consolidation and not necessarily the beginning of a continued sell down.
8,000 is the key support. We bounced off it intraday yesterday, and it seems reasonable to expect us to retest it today. Unless U.S futures herald further selling tonight, our market is likely to hold the 8,000 key support.
Wholistically we are simply waiting to see how the U.S tracks from here. They are clearly consolidating near their all-time highs, deciding whether to break through and continue the pump, or pullback and profit take. There is a strong argument for the pullback, but with positive sentiment clearly underpinning markets, and the confirmation of the Fed of imminent rate cuts, the U.S could easily set new highs.
US Markets
US shares closed lower overnight with selling across each of the three major indices ahead of the key NVIDIA report aftermarket. There was a lack of other major US economic data, and instead, markets were waiting on this report, as it as seen as a sign as to the direction of tech spending and perhaps even earnings growth (analysts have been upgrading US company earnings expectations due to the belief AI will cause an earnings spike). The apparent disappointment of the report, with shares trading 6-7% lower in aftermarket at the time of writing, could cause a revision to some of those earnings growth forecasts, dragging the market down as a whole. There will also be an important report tonight with the release of US GDP data, which will be followed by an inflation reading tomorrow night. With US markets around all-time high, key resistance levels, the next few days will likely determine whether we see another leg higher, or a sell-off from here.
Only two of the eleven sector groups of the SP500 closed higher overnight, with Financials and Healthcare stocks edging out small gains. Every other sector closed lower, with Technology, Discretionary, and Communications the worst performers.
Technically, despite some strength over the past few sessions, the SP500 has been unable to exceed the high of Thursday last week. The index does remain on an upwards movement, but should we see a bearish candlestick tonight, that would indicate a move lower. Should the market rise beyond that resistance, that would indicate further upside. Given the NVIDIA report, don’t be surprised to see a pullback here, though if US GDP data is positive tonight, that could change things.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
Latest posts by Karo Cornips (see all)
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