The XJO is expected to open lower once again this morning following another pullback in the U.S overnight. Their futures have also edged into the red.

The break lower overseas has certainly been committed to and with no uncertainty as the U.S experienced their third day in a row of bearish movement overnight. Our market will follow suit today.

Yesterday we bounced intraday from 7,100 support to retake roughly half the session’s losses. This morning we should retest 7,100. We would typically expect support to hold today, however our market has been more than willing to overextend to the downside over the past few sessions – so don’t be too surprised if we break lower again today.

With our market having virtually tracked sidewards for a solid two years, there are plenty of key levels of support and resistance. They come in pretty much every 50 point increments, so 7,050 is the next key level of support and 7,000 is the most recent low for our market.

A relief rally is due soon, especially from the U.S which continues to trade in a broad uptrend. 7,150, 7,200 and 7,250 are the next key levels. The convergence of the 200, 100 and 50 day MAs come in at roughly 7,250, however overtime these will drift lower if our market fails to make any meaningful gains over the next couple of weeks. At this stage it seems more likely our market mean reverts to these MAs sooner rather than later, which translates to a move to at least 7,200 – we just might go through more pain before we do. It will as usual, come down to how the U.S trades.

US Markets

US shares closed lower again overnight, with each of the three major indices again closing firmly in the red. The tech and growth-based NASDAQ index again saw the worst of the selling, while the value-based DOW JONES saw comparatively less selling. US economic data was again relatively strong overnight, with fewer than expected Jobless claims and with better-than-expected manufacturing data. Overall, US economic data continues to come in fairly strong, which has investors seriously worried about a likelihood of further interest rate rises. US yields continued to power higher overnight with expectations of further rate rises, while mortgage rates in the US hit their highest levels in 21 years. The Federal Reserve will meet for a policy symposium next week and some are expecting the Fed members to try to calm the volatile bond market, which could see yields start to come back down.

Ten of the elven sector groups of the S&P500 closed lower overnight, with Discretionary stocks the worst performers, followed by Staples stocks. Energy stocks were the only shares to rise on average.

Technically, the S&P500 has now broken below the longer-term uptrend and a few support levels including 4,450 and now 4,400. These are breaks key technical levels suggest further bearish movement. The next level to the downside would be the previous support at 4,320, which is now only one percent away.

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