The XJO is expected to open flat this morning following a meek rise in the U.S which saw their market give up most of their early session gains into the close. Their futures have edged into the red this morning, and if they remain so during our session, our market will struggle to hold ground today.

Yesterday we broke the pennant higher and managed to hold most of the day’s gain which were largely priced in on open. However, we are still beholden to how the U.S trades, which means that the break of the pennant is likely to whiff, rather than lead to extended gains as we may typically expect.

We pushed through key resistance around 7,450, with he next key level being about 7,500 to 7,550 which is marked by the consolidation we tracked in near the start of the year.

We still have a bit of catchup to play with the U.S, however they are looking quite toppy. If they do pullback, we shouldn’t necessarily expect to fall as hard, considering we are already several percent below their mark already – a retest near 7,350 seems reasonable. Otherwise, if the U.S manages to hold strength, potentially bouncing from their previous all-time high resistance as support, our market should have the confidence to follow suit and test 7,550.

The banks are looking oversold, and we may see a rotation from key financials into the miners which have fallen almost 10% over the past few weeks – provided iron ore can hold ground. This would translate to a suppression in our rallies if not largely sideward movement. Overall this seems the most likely outcome if the U.S doesn’t throw anything too surprising at us.

US Markets

US shares continued to grind higher overnight, with each of the three major indices again closing in the green. The moves were small however, and prices retraced most of the initial buying, returning to opening levels. Prices seemingly continued higher with the current bullish momentum more than anything else as there was a lack of economic data and company reporting overnight. This week is sparse for economic data in general, but we will see plenty of company reporting from tonight onwards. The major upcoming events for US markets however will be the Federal Reserve meeting next week, with the Fed expected to signal the likelihood (or unlikelihood) of a March rate cut. It is very possible that after the recent exuberance of the market, the Fed could seek to pour cold water on the massive rate cut expectations for this year; especially since the data still looks somewhat inflationary.

Eight of the eleven sector groups of the SP500 closed higher overnight, with Industrials and Real Estate the best performers. Utilities and Discretionary stocks saw the most selling.

Technically, the SP500 broke above the key 4,800 level on Friday, which was the all-time high resistance level. With this break higher, the index has continued to grind a bit further higher, although its hard to say where this move might stall. Should the index fall from here, the 4,800 level could act as support against any selling.

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