The XJO is expected to open flat this morning following another tumultuous night of trading in the U.S which saw their market retake intraday losses to finish marginally in the green. Their futures are also flat this morning.
Yesterday we managed to hold onto most of our gains as we broke the short-term countertrend higher. We settled near the 50 day MA by the close – a point of comfort for our market as we wait and see how the U.S trades from here.
We continue to trade in the broad channel, and at this stage, we look set to test the upper echelons of resistance. Roughly 7,800 is the next key level of resistance, with the top of the channel at 7,850 to 7,900 beyond it. To get there though, we would likely need to see the U.S also push higher or at least hold ground.
In the week ahead we also have a slew of both local and U.S key economic data which is likely to affect the broader moves of our markets. Most notably, local retail sales today at 11:30am (AEST) and local GDP data tomorrow same the time. The U.S will finish off the week with key employment data.
US Markets
US shares closed flat overnight, defying earlier strength in their futures. Prices did open higher but they quickly fell into the red, before another late rebound (similar to Friday) dragged them back to flat. US economic data was mostly weaker than expected overnight, with weaker than expected manufacturing data and a lower-than-expected FED GDP estimate. Overall, US shares have been rallying right at the end of the past few sessions to stave off finishing lower. It seems there is a battle between bulls and bears at this stage, with bears worried about extremely high valuations and weakening economic data, and bulls hopeful that future interest rate cuts will solve the high valuations and weakening economic data.
Four of the eleven sector groups of the SP500 closed higher overnight, with Technology the strongest performer, followed by Healthcare. Energy saw the most selling after OPEC announced they would increase production, while Utilities, and Industrials performed poorly.
Technically, the SP500 is in a bit of no mans land below the all-time high resistance at 5,340 and the support at roughly 5,200-5,220. We will need to wait and see if the index breaks either of these levels before another directional move looks likely. Should itbreak higher, its hard to say where the move may end but gains are likely to be incremental. Should it break below 5,200, there is another level close by at 5,150.
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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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