The XJO is expected to open lower this morning following another small pullback in the U.S overnight. Their futures have edged into the green.

Yesterday we reached all-time high resistance at roughly 7,850 and then pulled back intraday to give up almost half the day’s gains – keeping in step with the general indecisive movements of markets lately.

There is a short-term uptrend line in play which we should retest today. There is also key support at 7,750 which we may test as well if selling persists.

It is not surprising to see our market rebound from the all-time high resistance. To push through, we would need to see continued strength in the U.S as a minimum. We would also need to see either the financials or the materials lead the charge. The financials remain overbought, but could see another surge, and the materials are lamenting due to iron ore but are looking overbought. If the two sectors work against each other, it will be hard for our market to make meaningful gains. What seems most likely at this stage is continued sideward movement in a broad range.

US Markets

US shares drifted lower overnight, with each of the three major indices again finishing in the red. There was not a whole heap of major news and events overnight, so little movement was seen. US markets continue to have strong upwards momentum, but they have stalled out for the past two sessions after reaching all-time highs on Thursday last week. With the momentum stalling a little in the short-term, its possible that US markets trade sideways as they await the next major data and events. The most important event for this US this week will be the PCE price index (a measure of inflation) which will be released on Thursday night Australian time.

Only three of the eleven sector groups of the SP500 closed higher overnight, with Energy the strongest performer, followed by Utilities. Industrials saw the most selling, followed by technology stocks.

Technically, the SP500 broke out of an ascending triangle on Wednesday last week, breaking above the previous all-time high resistance. Technically, the SP500 looks like continuing higher from here, though given these levels have never been seen before, its hard to say where the rally may stall, to the downside, the previous resistance at 5,175, which is also roughly where the uptrend line sits, is likely to act as support.

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