The XJO is expected to open flat this morning following a similar night in the U.S. Their futures are in the green.
Our market set fresh highs once again yesterday, holding most of its strength into the close. Yesterday was the third day of solid bullish movement and today we are set to take a breather. With U.S futures we seem likely to hold ground, however, if they start to decline, don’t be surprised if our market profit takes.
The stochastic are firmly in the overbought area, and we have moved far enough away from the moving averages that we warrant a short-term mean reversion. We have no resistance to target, but with our muted open, we could be seeing one form around these levels. 7,900 is now key support and the most logical target when we do see a pullback.
We have unemployment data on Thursday. It is expected to increase from 4% to 4.1% – still essentially full employment. If the reading comes in less that expected, our market is likely to take issue and sell down. Otherwise, it is hard to say. We have run our own race over the past couple of days as we play catch up to the U.S. This morning’s breather shows we are willing to hold ground for now, where as even a week ago, these gains would have been shed pretty quickly. We will need to wait and see what our market’s attitude is going forward, but need to be mindful that the headwinds that were present a week ago, are still very present.
US Markets
US shares closed higher again overnight, with another record high reached for the SP500 index. However, shares pulled back throughout the later parts of the session, with the SP500 eventually closing below its opening level. US markets were pushed higher again after Fed Chair Jerome Powell again spoke overnight and again pointed to rate cuts towards the end of the year, stating that if the Fed waits for inflation to hit the 2 percent target, they have waited too long. Markets also seemed to applaud the looming landside for Donald Trump in the Presidential election. This is because Trump seems to measure success in the strength of the stock market and previously enacted policies that benefit large listed companies. US markets seem to be enjoying almost goldilocks conditions, but prices are extremely high at current levels and even if everything goes right, earnings will struggle to justify the current levels. The US earnings season has just begun, with Goldman Sachs reporting a good result overnight, while Blackrock disappointed.
Six of the eleven sector groups of the SP500 closed higher overnight. Energy was the strongest performer, followed by Financials stocks. Utilities was the worst performing sector overnight.
Technically, the SP500 again closed below the potential resistance at 5,650 index points overnight. For further gains to be seen, the index will need to close above 5,650 index points. Should the index fall from here, the previous resistance at 5,500 is likely to act as support.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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