The XJO is expected to open flat this morning following an indecisive night of trading in the U.S which saw their market also finish flat. Their futures have edged into the red.
We continue trading in our broad ascending triangle. The U.S managed to push through theirs late last week, thanks to a strong rally in Nvidia. Our market is not as well represented by tech, and so we have not had the same propellant underpinning our moves. Our largest sector, the financials, namely the “big four”, have been doing a lot of the heavy lifting, keeping this market elevated. The miners on the other hand, our second largest sector, have been lamenting with falls in Iron Ore, and so it’s no real surprise that we continue to largely track sideward at the top of the range whilst the U.S continues to make fresh highs.
Key resistance remains at roughly 7,700, however there may also be a countertrend line forming as our last peak fell just shy of 7,700, forming a slightly lower peak. This would make sense as it shows the decreased volatility in the index over the past week or so. The underlying uptrend line comes in at roughly 7,600.
Typically, we expect triangle patterns to break in the direction of the underlying trend. In this case, we would expect the resistance at 7,700 and the potential countertrend to break, giving our market the opportunity to make fresh highs. Of course, the U.S would need to maintain strength for our market to feel comfortable doing so. However, with our shaky miners, and our overbought financials, we could simply break the uptrend line and continue tracking sideward, particularly if the U.S sees some mean reversion or consolidation. 7,550 to 7,500 remains key support if we do see a small pullback.
It’s a quiet first half the week regarding macro news. On Tuesday night we have U.S consumer confidence. On Wednesday night we have U.S GDP. On Thursday we local retail sales numbers, and Thursday night we have U.S PCE data. To finish the week, on Friday we have Chinese PMI data, followed by U.S PMI data that night.
The most important news this week is likely U.S GDP and local retail sales numbers. The narrative underpinning markets remains about the timeline for rate cuts from central banks, who are largely basing their guidance on these type of macro releases. The U.S has seen strong data this year, which should push the rate cut timeline further out, however they have remained bullish – perhaps on sheer bravado and momentum, or perhaps because the strong data could be pointing to that promised “soft landing”.
US Markets
US shares closed flat on Friday after initially trading higher, before pulling back. There was a lack of major economic data for US markets on Friday, so instead prices mostly drifted around current levels. NVIDIA continued to be the driver, with the stock pushing a little further higher on a night where the average technology stock closed lower. The other notable feature of US markets at the moment is that the rate cut timetable keeps being pushed out in time. At the start of the year it looked like we would see US rate cuts in March, but the expectations for the first rate cut have now been pushed out to June and they could be pushed out further if US data remains as strong as it was in January and February.
Seven of the eleven sector groups of the SP500 closed higher on Friday, with Utilities and Materials the strongest performers. Energy and Discretionary stocks saw the most selling.
The SP500 broke above its previous all-time high at 5,050 on Thursday night but it struggled to push further on Friday and reversed from its intra-day high of 5,100. Its hard to say where this move may stall, because these levels have never been seen before but it would need to close above 5,100 for further gains to look likely. Should we see selling from here, the first potential downside target would be potential support at 5,000.
Want to learn how to trade?
The team at TradersCircle/Emerald Financial have released a free online stock market education course, click here to enrol and get started.
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)
- XJO to open flat with US markets back around resistance - September 2, 2024
- US markets close lower ahead of NVIDIA report, which disappoints - August 29, 2024
- Investors take pause ahead of key NVIDIA report - August 28, 2024
Leave a Comment
You must be logged in to post a comment.