US markets rebound after four session of selling, XJO expected to open higher

The XJO is expected to open higher this morning following a rally in the U.S overnight. Their futures sit flat this morning.

Yesterday was a fairly mild day where we once again indicated that we are willing to hold the key support at roughly 7,280 as we bounced intraday to finish marginally in the red. Today should be similarly quiet as markets consolidate heading into the U.S CPI reading on Thursday night.

WBC consumer sentiment and NAB business confidence numbers should be released today at 10:30am and 11:30am respectively. These reports should largely be a non-event. It will be interesting to see how confident consumers and the private sector are in the current environment, but it is hard to suggest our market will have any serious reaction and break consolidation.

Roughly 7,280 remains the key support, roughly 7,330 the top of the recent consolidation range, and 7,380 the next key level of resistance.

US Markets

US shares closed firmly higher overnight as prices rebounded following four session of selling last week. There was a lack of major economic data and a lack of company earnings reports from the US overnight, so instead prices rebounded somewhat from recent negativity. Overnight some Fed members did come out and state their view that monetary policy will need to be tight for some time, and that further rate rises aren’t out of the question. Markets had been very optimistic that the inflation battle was wrapping up and that rates were at their peak. However, Thursday’s US CPI reading is expected to show CPI growth rising for the first time in months, to 3.3% in July from 3.0% in June. A lot of this will be the rebound in oil prices, and they have continued to rebound throughout the start of August. This has caused doubt in investors minds, and on top of the fairly average earnings season, many have decided that it might be time to take some profits.

Ten of the eleven sector groups of the SP500 closed higher overnight, with Communications, Financials, Industrials, and Real Estate faring well. Utilities were the only stocks to close lower on average.

Technically the S&P500 has falling from the resistance level at 4,600 and looks like continuing the bearish move to the uptrend line. The potential downside targets for the move are the longer-term uptrend and the previous resistance which may now act as support – both of these lines currently sit around 4,450.

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