XJO expected to open flat, with Tech holding US markets high

The XJO is expected to edge lower on open this morning following a muted night of trading in the U.S which saw their market retake intraday losses to finish marginally higher.

Yesterday we tried to retake some of the losses from earlier in the week, but didn’t have the conviction to move away from the 50 day MA. This has been a major point of comfort for our market over the past month or so as we push and pull with the various market forces.

The miners continue to sell off, putting pressure on our market, and the banks look like they have run out of steam. Unless we see the miners come online, it will be hard for our market to price in any further strength in the U.S.

7,800 and 7,850 look like the next targets, but if the U.S continues sidewards, then we are likely to hang around the levels or perhaps even selldown. 7,700, 7,650 and 7,600 are the key levels to the downside, with 7,550 the bottom of the trading range.

US Markets

US shares closed mostly higher again after initially trading lower throughout the morning before rebounding in the afternoon. Overnight US producer prices also came in lower than expected, which in addition to the lower consumer prices from the night before, continues to highlight that inflation is coming down. This is a good thing for markets as it points to coming interest rate cuts, thought these rate cuts are perhaps going to happen slower than the market initially expected. As of last week, many and perhaps most economists were expecting two US rate cuts this year, but at the US Federal Reserve meeting this week, the ‘Fed’ suggested there would be only one; which put a dampener on a mood that would otherwise likely be extremely bullish. Regardless, shares do look expensive after rallying for months on end, so further upside is likely to be very incremental.

Only four of the eleven sector groups of the SP500 closed higher overnight, with Technology once again the strongest sector. Most sectors closed lower, with selling led by Communications, Energy, and Industrials stocks.

Technically, the SP500 recently gapped through the previous all-time high at 5,375 and continued into blue sky territory. Its hard to say where the upwards movement will stall, but for the past two sessions the index reached 5,450 before pulling back. To the downside, the previous resistance at 5,375 is now likely to act as support.

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