The XJO is expected to open lower this morning following a muted night of trading in the U.S. Their futures are also flat.

Our market may have gotten ahead of itself yesterday. With the U.S not following suit, our market is due to give up most of yesterday’s gains on open. We should open near 7,950.

It seems we have found a new rough range to trade in whilst we digest the shifting sentiment both locally and in the U.S. For a long while we had tracked sideward, looking for any excuse to fall, and likely only being propped up by a strong U.S. There were plenty of headwinds to justify this push and pull, and despite them remaining, the status quo has certainly shifted to being much more bullish. However, the U.S is now not doing much. We have finally joined the party and the U.S is sort of sitting down for the moment and catching its breath.

We are consolidating for the moment, with roughly 7,900 as key support and roughly 8,075 as key resistance. Much of the price action is happening around 7,950 to 8,000. These are the levels we seem to want to hang around in the short-term as we grapple with both our own sentiment and how the U.S is trading.

There may have been an uptrend line in play that shallowed out from last week’s break. Yesterday the XJO broke the short-term countertrend line, which could be seen as our market breaking a pennant pattern. Regardless, the rough consolidation range seems to be the dominant pattern.

Keep in mind we have local CPI numbers tomorrow at 11:30am (AEST). They are projected to actually increase from same time last year. If they do so, then our market will likely not be happy as it pushes us even closer to rate hikes again.

US Markets

US shares closed slightly higher overnight despite strong futures during our session yesterday. The SP500 and NASDAQ finished slightly in the green, while the DOW JONES saw slight selling. US shares really struggled to push higher, with last week’s selling and volatility perhaps continuing to weigh down on prices. In general, US shares have everything they could ask for, but prices are extremely expensive, and profit taking seems to be taking place. There will be a Federal Reserve meeting this week, and though they aren’t expected to cut rates here, they are expected to signal a cut at the next meeting; something that should be positive for the market. Still, historically markets have rallied up until the point rates are cut, with selling historically following. Only time will tell if that is again the case.

Seven of the eleven sector groups of the SP500 closed higher overnight, with Discretionary stocks the strongest performers, followed by Communications and Real Estate stocks. Energy stocks saw the most selling, followed by Financials and Technology stocks.

Technically, the SP500 seems to have found some support around 5,400, which is bounced off on Friday, continuing in the overall upwards movement. There still seems be a short-term downwards counter trend in play, should we see a break above this line, with would likely indicate a move back towards the all-time high resistance at 5,670. However, should we see further selling and a break below 5,400, we could see a move back to 5,250.