The XJO is expected to open flat this morning following a tumultuous night of trading in the U.S overnight. Their futures have moved into the green however.

Their market has taken the Fed meeting last night with mixed feelings. Our market is likely willing to hold key support at roughly these levels, bolstered by their positive futures against a backdrop of uncertainty.

Yesterday we rebounded off the downtrend line. Even though we are expecting to hold for now, we should expect the descending triangle to break in the direction of the underlying downtrend. This would mean seeing 7,500 again, and then perhaps more broadly, 7,350 to 7,400 which is roughly where the 200 day MA comes in.

The Fed has done its best to quell market fears, however it may not be enough considering how strong the data has been lately.

US Markets

US shares closed relatively flat overnight after the Federal Reserve meeting, with Jerome Powell stating that another rate rise was very unlikely (in response to recently strong inflation data). US markets traded back and fourth throughout the session, with prices strongly higher at points before pulling back late to close only slightly lower. Powell also played down the stagflation concerns, pointing to continued economic growth. Overall, the event was probably about as positive as could be reasonably expected for markets, given the recent strong inflation data. Markets should still be expected to hold a bearish slant for the moment however, until data starts to suggest inflation is continuing to fall. On the earnings front, Amazon and Pfizer were both higher following strong earnings results, while Mastercard fell following a miss.

Five of the eleven sector groups of the SP500 closed higher overnight, with Utilities and Communications stocks the best performers. Technology and Energy stocks saw the most selling, with energy falling after a drop in oil prices following a build-up in oil inventories.

The SP500 has bounced down from a medium-term downtrend line, potentially signalling further bearish movement. The recent low around 4,950 is now the downside target and the major level to watch. Should the index bounce from that level (or higher) it would indicate a return to the downtrend line (currently around 5,100). Should the index break below 4,950 the downtrend will be continuing and we could see a move back to 4,800 – 4,850.

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