The XJO is expected to edge lower on open this morning following a mixed night of trading in the U.S which saw their market retake intraday losses to finish fairly flat. Their futures are also flat.

Wholistically, our market is tracking sideward at the bottom of the range. The bearish momentum has subsided, but still underpins our market. Indeed, our market yesterday held the short-term downtrend line. This puts us in a short-term descending triangle. It seems likely we retest key supports at roughly 7,000 to 6,950 before we break higher, with even 6,900 a reasonable target considering the U.S still looks bearish to 4,200.

It seems we will lament for the rest of the week, but there is good reason to believe a recovery is in order through October. If we can see the U.S find a base at 4,200 which seems likely, then markets will have a good platform to rise and follow seasonal trends. Its reasonable to expect a recovery to begin next week.

US Markets

US shares closed relatively flat overnight, with prices trading notably lower at points before rebounding to close around their opening levels. There are a lot of negative factors for US investors to weigh up at the moment, including a potential further rate rise, higher for longer interest rates, persistently high inflation, a looming government shutdown, and other factors. US shares have sold off a fair amount as these factors have mounted, but there is not guarantee that markets are out of the woods yet. Most likely investors will want to see signs of economic slowing from here, as this could be a sign that more rate rises won’t be needed. The next potential event to show some slowing would be the US GDP growth data tonight, which is expected to show continued strong economic growth. At this point, markets will be wanting to see this number come in lower than expected.

Six of the eleven sector groups of the SP500 closed lower overnight, with Utilities again the worst performers. Real Estate and Staples stocks also fared poorly. Energy stocks saw the most buying after continued strength in oil prices.

Technically, the SP500 came down to the potential support level at 4,250 overnight, which it bounced from. With the index holding this level and bouncing back to close flat, it could be the early signs of a bullish reversal. Overall the momentum remains to the downside, but there is always a chance of a bullish rebound. The key levels to watch now are 4,250 to the downside, or 4,330 for potential resistance on a bounce.

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