The XJO is expected to open higher once gain this morning following a rebound in the U.S overnight. Their futures are flat.
Yesterday we managed to lead the U.S with our own rally which pushed as back above 7,600 to test 7,650. Though, we were bolstered by positive U.S futures throughout our session – so their move last night was partially expected and priced in yesterday. We managed to wipe of all of Friday’s falls and set a bullish entry signal. Furthermore, the stochastic are pointing up and coming out of the overbought area. We are set to push through 7,650 this morning and continue the bullish move, however with flat U.S futures, it would be hard to expect too much from us today. 7,700 remains key resistance which is also roughly where the 50 day MA comes in. This is the most reasonable target in the short-term.
The “buy-the-dip” mentality is underpinning the recent move, especially considering the market believes that Iran will not retaliate to Israel’s attack on Friday. However, cracks have formed in markets surrounding interest rates. The U.S market keeps revising how many it expects this year and how soon they expect to cut. These revisions are likely responsible for lion share of the pullbacks since their highs at the start of the month. We may have seen the extent of the falls in the short-term and they will likely be waiting for further data releases before making too brash many decisions.
US Markets
US shares finally rebounded overnight, with each of the three major indices finishing in the green. This comes after six sessions of lower closes in a row for the SP500, though the overnight session didn’t hold near the highs of the day. Overall US markets remain extremely disappointed that rate cuts won’t come any time soon, and they are starting to worry about the real possibility of further rate rises. We are also in the middle of a company earnings reporting season, with plenty of big reports to watch for this week. Tentatively, it does look like US markets could make a small bounce after the strong selling of the past week, but for a meaningful bounce, they will likely need to see some deflationary data.
Every sector of the SP500 closed higher overnight, with Technology, Financials, and Utilities the strongest performers.
Technically, the SP500 rebounded overnight, but it struggled to hold above the 5,000 level. Should we see a further bounce from here, we could see a rise towards 5,100 – 5,150. The index continue to fall and break below the next potential support at 4,950, which it bounced off intra-day.
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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.
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