The XJO is expected to open lower this morning following a strong pullback in the U.S overnight. Their futures have moved into the green, however, and if they remain so during our session today, will help stem the bleeding. Furthermore, our market will not fall from as higher base, meaning we likely have less of it to price in. All of this makes for an open near 7,300, which has been a rough floor of the recent consolidation range.

Broadly our market still looks overbought as we trade near the top of the recent range, grinding along key resistance. With the recent falls, it seems more likely that we see a pullback from here, rather than another leg up – but we of course should wait for stronger confirmation.

Today we have local CPI data which is expected to weaken from last month (both YoY and MoM).

US Markets

US shares are lower since the Australian market last traded. Price were fairly flat on Monday night before falling strongly overnight. Mixed earnings results and concerns over the severity of a future recession have widely been blamed for the selling. Bad results from First Republic bank, amongst others, led to strong selling. However, after US markets closed overnight, both Alphabet (Google) and Microsoft reported first-quarter results that exceeded expectations, and that has pushed US futures moderately higher today. Investors will remain focused on earnings for the rest of this week, but next week will see a US Federal Reserve interest rate decision. Markets are pricing in a 75% chance of a rate rise at that meeting, and whatever happens could lead to some directional movement.

Every major sector of the SP500 closed lower overnight, with Technology, Discretionary, Materials, and Energy baring the worst of the selling, though most sectors closed notably lower.

The S&P500 has broken through the medium-term uptrend and has fallen back to the support at 4,070, which will have to break before it will look like falling further. Should this level break, we could see a move to 4,000 index points. Should the index bounce from here, the recent peak at 4,160 is likely to act a resistance.

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