The XJO is expected to edge higher on open this morning following a second night of indecision in the U.S which saw their market finish marginally higher. Their futures are also meekly in the green.
Our market pulled back yesterday, likely due to sticky unemployment numbers which our market would have preferred to see come in worse than expected. We clearly rebounded off the key resistance at 7,100 and have settled at key support at 7,050. We wait for the U.S, to see if they will either profit take from here, or doggy leg up again. It would be hard to suggest our market will chart its own course.
Their market looks quite overbought by short-term metrics, and so it could easily be argued that profit taking is due. Considering our market has only really risen about half what their market has from the lows, it may mean we don’t fall as hard either. Indeed, this may translate to a broad trading range between roughly 6,950 and 7,150.
US shares closed flat again overnight, with the bullish momentum giving way to a bit of a breather and perhaps some profit taking over the past couple of sessions. US economic data was mostly worse than expected overnight, with higher than expected jobless claims, and worse than expected export and import prices. Though this data was worse than expected, it did support the belief that inflation is continuing to fall and that interest rates are unlikely to go any higher. We would expect to see some profit taking in US markets shortly after the monster run that shares have enjoyed across the past two weeks, but for the time being, signals for this profit taking are yet to be seen.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Communications and Technology stocks the best performers. Energy stocks were the worst performers, followed by Staples stocks.
Technically, the SP500 may be stalling out around the 4,500 – 4,520 level, which was resistance in August and September. Should the index pull back from here, it could return to historical support levels around 4,450 or even 4,400. Overall the momentum does seem to be strongly higher at the moment, so higher peaks and troughs over a more medium to longer term could be expected.
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