US shares close mostly higher, XJO to open slightly higher

The XJO is expected to edge higher on open this morning following a strong rally in the U.S overnight which saw their market bounce from their key support at 4,330. However, their futures sit mildly in the red and much of the rally came from tech stocks.

Yesterday we held our lows into the close to finish just above the 7,100 key support. This level is also the lows of the recent run down, and with today’s expected bullishness, it is comforting to see our market find a base. From here, it is expected that we either track sideward or have a small relief rally. It will likely come down to the U.S. Last night’s move may extend harder into the green however there is a short-term downtrend line in play. This could translate to our market seeing 7,200 to 7,250 where the MAs converge – though this seems like wishful thinking in the short term unless the U.S breaks higher.

It feels more likely at this stage that we track sideward at the bottom of the range, with pressure remaining to the downside. Obviously, in order for the market to hold these levels we would need to see the U.S do the same.

US Markets

US shares closed higher overnight, with the tech-heavy NASDAQ finishing strongly higher, while the more broad-based SP500 saw more moderate buying. The Dow Jones closed flat. There was a lack of major news and events in US markets overnight, and most investors are now looking ahead to the Federal Reserve’s policy discussions later this week. Though they won’t decide on interest rates at these discussions, they are expected to give insights into their view on the potential for re-inflation and the likelihood that they will raise rates further. Indeed, most investors are starting to price in a higher-for-longer view on interest rates and as a result, US government bond yields hit a 15-year high overnight, reaching levels not seen since immediately before the GFC.

Five of the eleven sector groups of the SP500 closed higher overnight, with Technology and Discretionary stocks the strongest performers. Real Estate and Staples stocks saw the most selling.

Technically, though the SP500 remains on a downtrend it seems to have bounced off a potential support level around 4,325. Overnight it rallied to the previous support at 4,400, which it held as resistance. Should the index break below 4,325, we are likely to see further selling. Should the index rise through 4,400, we are likely to see a rise to the next level at 4,450.

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