The XJO is expected to open lower this morning following continued selling in the U.S overnight. Their futures are flat this morning.

Yesterday we managed to hold 7,750 support, likely bolstered by positive U.S futures throughout session. However, U.S retail sales came in stronger than expected, strengthening the creeping fear that rate cuts are at best being pushed out, and at worst not happening this year.

We should open near 7,700, and it seems likely we hold these levels provided U.S futures remain stable. 7,700 is both a key level of support, and roughly where the 50 day MA comes in. Furthermore, our continued sell down this morning will confirm the break of the uptrend line.

The U.S is due for a rebound, considering how they have been trading lately. We could see further selling, but in the past, they have largely shrugged off strong data within a handful of days. Broadly however, this could be the beginning of a correction.

If 7,700 breaks, then 7,650 and 7,600 are the next key levels and at this stage we should expect them to hold.

US Markets

US shares continued lower overnight, with another night of strong selling across the three major indices. The selling continued on from the higher than expected CPI reading last week, which decreased the likelihood of interest rate cuts moving forwards. Overnight there was additional data in the form of stronger than expected retail sales, which also calls into question the likelihood of interest rate cuts any time soon. Given that rate cut hopes have been dashed a bit this year, and given that US shares have been on a monumental uptrend, some profit taking shouldn’t be too unexpected. Overnight we saw a continuation of the company earnings reporting season as well, with Goldman Sachs finishing higher after a better than expected result.

All eleven sector groups of the SP500 closed lower overnight, with Technology the weakest performer, followed by Real Estate, Communications, and Discretionary stocks.

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