Will rates soon peak?

The XJO is expected to open flat this morning despite a small rally in the U.S overnight and their flat futures this morning.

It seems our market is reluctant to make any further gains at this stage, even with the U.S edging higher and holding strength. Indeed, yesterday we gave up all our intraday gains to finish fairly flat.

It is likely that despite the lower than expected CPI reading, the negative sentiment around inflation and monetary policy that has underpinned our market the past couple of months isn’t so quickly forgotten.

We have stalled at key resistance which roughly comes in at 7,230. This is also roughly where the 50 and 100 day MAs come in. Whether we will push through or rebound lower is hard to determine at this state. It will likely come down to whether the U.S can continue higher or not.

US Markets

US shares closed mostly higher overnight, with the more value-based DOW JONES and SP500 closing higher, while the more growth-based NASDAQ closed flat. This comes after comments from US Fed Chair Jerome Powell that though CPI growth is starting to drop, there will likely be at least two more US rate rises. US bank shares had a particularly positive session, with prices rising after they passed the Federal Reserve stress test. Other economic data was also positive, with Jobless Claims lower than expected, and with US GDP revisions coming in better than expected, though there was a drop in US pending home sales. In general, US markets remain optimistic that inflation is coming under control and that the economy isn’t being damaged too much by the rising interest rates.

Eight of the eleven sectors of the SP500 closed higher overnight, with Financials the strongest performers, followed by Materials stocks. Communications stocks saw the most selling.

The SP500 remains in a longer-term uptrend with resistance at 4,450 which would have to break for further gains to look likely. Should the index resume falling from here, the recently broken resistance of 4,300 could act as support against a downside move.

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