The XJO is expected to edge lower on open this morning despite a strong rebound in the U.S overnight. Their market managed to hold support, and reverse most of the previous session’s losses. Their futures are also mildly in the green.

Our market is expected to open near 7,800, which seems to be a popular inflection point for the past month or so. Yesterday, we finished just above it after we managed to reverse most of the 100 point opening fall. It is likely our reversal yesterday, which the U.S practically matched overnight in their rebound, that likely explains our inaction this morning.

7,750 remains firm support, and 7,850 remains firm resistance. Beyond that we have 7,700 which is where the 50 day MA comes in, and 7,900 which represents roughly our all-time highs. It is these key levels that keep our market tracking in a broad range. We should still assume a bullish tilt, and therefore to make meek new highs over time, however cracks are starting to form and the undercurrent of market sentiment seems to be swelling. With the strong inflation reading and rising bond yields, the U.S looks like it is preparing to price in higher-for-longer rates. This looks like it will be a slow realisation, rather than a quick and heavy tumble. We see this in the slow grind down in SP500 over the past week or so, and of course our market remains not committal.

US Markets

US shares were mostly higher overnight, with the SP500 and NASDAQ rebounding, while the DOW JONES finished lower. The SP500 mostly retraced its losses from the hotter than expected CPI reading, though not entirely, as the index held below the key 5,200 level. Overall the CPI reading should be interpreted as a negative however, as it does suggest an increasing likelihood of no Fed rate cuts this year, and potentially even higher rates. Regardless, the technical momentum is still to the upside for markets, and its hard to say what perspective will win out in the short-term. Tonight we will also see the start of the US company earnings season, which is expected to be strong after continued strong economic data.

Five of the eleven sector groups of the SP500 closed higher overnight, with Technology, Communications, and Discretionary the only sectors to see notable gains. Financials saw the most selling, followed by Healthcare.

Technically, the SP500 bounced back to the 5,200 level overnight, though it held just below this level on the close. Should we see selling from here, the first downside target would be the 5,150 level. Should we see a close below this level, which could signal a move back to the next level at 5,100 index points.

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