The XJO is expected to continue falling today following another night of selling in the U.S. Their futures have stabilised however, which at least indicates that the selling isn’t being immediately met with more.
As per usual, the U.S looks like it will run the clock in the debt ceiling issue. Commentators are confident it will be resolved, albeit in the 11th hour. British CPI came in much higher than expected yesterday, and FOMC minutes indicated that a rate pause wasn’t certain. All in all, it has been a tough 24 hours for markets, with not much to be positive about.
We should open near key support which is roughly 7,150 to 7,200. The last few attempts at this level has seen us bounce intraday from roughly 7,150 to finish near 7,200 by close. However, with the bearish sentiment, it would be hard to expect a similar occurrence today – unless U.S futures gives our market something to be hopeful about.
If 7,150 breaks today or in the coming sessions, then 7,100 remains the next clear target. This is roughly where the 200 day MA comes in and often acts as a magnet for markets.
US Markets
US shares closed lower overnight, with each of the three major indices again closing lower. This came after much stronger than expected inflation numbers in the UK, which pushed up bond yields around the globe – suggesting we may see more interest rate rises in this tightening cycle. Additionally, there was also no resolution of the debt ceiling issue, which is coming down to the final few days. In this environment, it is unsurprising that traders and investors are nervous about the outlook for shares. Despite this, should a debt ceiling deal be announced, we could get a short-sharp bounce higher from markets.
Ten of the eleven sector groups of the SP500 closed higher, with Energy stocks the only space to close in the green after comments from OPEC members that they might cut oil production. Every other sector closed lower, with Real Estate, Financials, and Industrials the worst performers.
The SP500 remains in the sideways consolidation range of 4,050 to 4,200 and we have to expect further sideways movement unless 4,200 or 4,050 breaks. Should it break below 4,050, the next target would be the support at 4,000. While a break above 4,200 will likely see an uptrend for the SP500, with a possible upside target of 4,300.
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Sam Green is the Portfolio Manager at Emerald Financial, whilst also being an Equities and Derivatives expert for his clients at TradersCircle.
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