US shares reverse from all-time highs, XJO to open lower

The XJO is expected to open lower this morning following a pullback in the U.S on Friday. Their futures have edged into the red this morning.

We managed to break higher on Friday and make fresh highs once again, however, as usual, our new heights are being met with selling. The market remains indecisive and whippy, which makes perfect sense as we appear to be running out of steam as we trudge higher.

There is no question the market looks overbought, but it has looked overbought for a month or so now, and it keeps pushing higher (albeit begrudgingly). It felt like we finished the week with renewed vigor, and despite the pullback on open this morning, our optimism could remain – however we would need to see the U.S push back higher.

Ultimately, it is hard to expect much different from what we have seen the past two weeks. Despite our pullback we should simply expect a bout of consolidation before doglegging higher again – or at least until we see a shift in sentiment. Don’t be surprised to wake up in the coming weeks to a massive sell down in the U.S as the form these markets decide to mean-revert, profit take, or correct.

We should open near 7,800. We might test support at our previous all-time high which comes in around 7,750, though it seems likely we would need to see the U.S futures move further in the red first.

It is a public Holiday in Melbourne today, but as the market is open, so is our office.

US Markets

US shares closed lower on Friday after initially trading higher. Prices reached fresh all-time highs but pulled back after the US jobs report showed that there were more jobs created than expected in February, which points to a stronger than expected economy. This suggests that inflation may still be fairly strong, and that the rate cut timetable may continue to be pushed out. One silver lining from the rate cut perspective is that wages growth was slower than expected, which is a little deflationary. On Tuesday night we will see the latest US CPI numbers (for February) and they will be massive in determining if we see US rate cuts in the first half of 2024 or not.

Four of the eleven sector groups of the SP500 closed higher on Friday, with Real Estate the strongest performer. Technology stocks saw the most selling, followed by Staples stocks. Most other stocks were fairly flat.

Technically, the SP500 is continuing along its longer-term uptrend line that has formed since October. On Friday prices continued higher again before pulling back, which could be a sign of a reversal signal. Should the index keep falling from here, the first downside target would be the uptrend line around 5,075; should that break we could see further selling. Should the index rise from here, the recent peak around 5,150 would have to break before further gains look likely.

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