The XJO is expected to open flat this morning following a tumultuous night of trading in the U.S which saw their market shed intraday gains to finish flat. However they still managed to hold key support and our market will likely take this as a positive sign.

Don’t be surprised if we do see some selling today to pullback towards our own key support at 7,280 so we don’t get too ahead of the U.S in the short-term.

We will need to see how the U.S continues to digest their overnight CPI reading. If they rally, then we should follow them higher with our next key resistance at roughly 7,380. If they fall however and break through support, then we will also likely follow lower. 7,250 and the convergence of the 50, 100 and 200 day MAs is the next key target.

At this stage, a move higher seems more likely but obviously we would need to wait and see.

US Markets

US shares closed flat overnight, with prices trading firmly higher at points before falling back to Wednesday’s closing levels. US markets were volatile after the July CPI reading, which showed that inflation ticked up from June’s lows, not the direction investors and central banks will be wanting it to head. Core CPI did fall slightly however, and the headline CPI growth number was slightly lower than expected by economists (3.2% vs 3.3% expected). Still, This slight rebound in inflation has largely been triggered by a strong rise in oil prices in July, and this could eventually trigger further price gains in other goods and services. Regardless, the reading wasn’t bad enough for more rate rises to be priced in just yet, and the US government bond yield curve was only slightly higher.

Six of the eleven sector groups of the SP500 closed higher overnight, with no sector rising to any notable degree. Similarly, most sectors that fell only saw light selling.

Technically the S&P500 has fallen back to the uptrend line and potential supports at roughly 4,450. These are some key levels so there is every chance we see a bounce from here. Do not pre-empt the bullish move however, and wait for a nice clear entry bar off these lines, otherwise, if the index breaks to the downside, we could see substantial further selling.

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