The XJO is expected to open higher this morning following a strong move in the U.S last night. Their futures sit flat.

The U.S broke through resistance last night and we are expected to do the same this morning with an expected open near roughly 7,330. This puts us only a stone’s throw away from the top of the channel at 7,370 which we may indeed reach today if U.S futures don’t run into he negative during our session.

Much of the positivity was on weak U.S retail data, entrenching the high likelihood the U.S is close to peak interest rates. Our market however has no such certainty for local monetary policy, and our move higher feels like it is being dragged along. It also seems that the negative sentiment has left our market recently, but it would hard to not expect it to return with gusto when we see the U.S profit take and mean revert from being so overbought. This also strengthens the likelihood we hold the top of the channel and key resistance. For us to get through in the short term, we would need to see the U.S keep pushing higher.

US Markets

US shares powered higher again overnight, with each of the three major indices finishing firmly in the green. Strength came after US retail sales grew by less than expected, which is a further signal that inflation is slowing. US earnings overnight was also rather positive, with strong gains in banking stocks Bank of American and Morgan Stanley after better than expected results. Overall, US markets remain in a strongly bullish mindset and it appears that little can shake this sentiment at the moment. Investors remain confident that US rates will soon peak, and indeed, the overnight retail sales data supported that assumption. The next and potentially final US rate rise will come next Wednesday at the Federal Reserve July meeting.

Eight of the eleven sector groups of the SP500 closed higher overnight, with Technology the strongest performers, followed by Financials. Real Estate stocks saw the most selling, followed by Utilities stocks.

Technically the SP500 is continuing on its uptrend and now the next potential resistance level is some way away at the 4,600 level. This level hasn’t been reached in over a year, so its hard to say whether this will be the resistance level or not. Should the index fall from here, recent resistance at 4,450 may now act as support.

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