XJO stuck at 7,300

The XJO is expected to open flat this morning despite a small rise in the U.S overnight. Ultimately, their market is trading at the top of the range, and so our market is following suit. Their futures are also flat this morning.

Yesterday was an indecisive day of trading. We clawed back some early session losses to finish fairly flat. There is a tentative medium-term downtrend line that looks like we may have stalled at over the past couple of sessions – though it seems yet to be confirmed.

We are marginally in overbought territory when considering both the stochastic and 50 day MA. We have also stalled at a key resistance, and when taking into account the potential downtrend line and trading near the top of the range, it feels like we are in a better position to fall than take on further gains. However, we are only a stone’s throw away from 7,370 which is top of the channel and the highs for the past several months, and so we could easily see one last leg up before profit taking comes in. For this to occur, we will almost certainly need to see the U.S break their resistance (albeit one that hasn’t been in play since April last year).

We have an RBA monetary policy this morning at 11:30 (AEST). This is not an interest rate decision but will provide the market a better understating as to the RBA’s perspective of the current economic environment and their future guidance on monetary policy. This could easily trigger our market one way or the other.

US Markets

US shares closed higher overnight, with minor gains in the DOW JONES, moderate gains in the SP500, and strong gains in the NASDAQ. There was a lack of major US economic and earnings data overnight, so instead US shares continued their recent bullish momentum. The earnings season will continue in earnest tonight, with Bank of America, Morgan Stanley, Lockheed Martin, and many other big names reporting results. We will also see the release of US retail sales numbers tonight, which will influence the interest rate-inflation-recession narrative that has been moving markets for the past 18 months. In general though, it seems that without other major news, US shares are happy to continue drifting higher.

Six of the eleven sector groups of the SP500 closed lower overnight, with Utilities the worst performers, followed by Real Estate stocks. Technology and Financial stocks saw the most buying.

The SP500 closed above the resistance at 4,510 index points overnight and now the index technically could continue higher to the next potential level at 4,600 index points. The recently broken 4,450 level will now be expected to act as support should the index fall from here.

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