The XJO is expected to edge lower on open this morning, following a small pullback in the U.S overnight. Their futures sit flat.

Yesterday we managed to retake intraday losses to finish slightly in the green. Both the XJO and the U.S are consolidating sidewards with indecisive trading as we head into the U.S CPI reading tonight.

7,200 to 7,150 has marked the recent consolidation range, but it is likely we break out of this in coming days as we should expect movement following the CPI reading. If markets spit the dummy, then 7,100 to 7,000 are next the key levels of support. However, with the economy cooling and central banks reinforcing data-dependant future guidance on monetary policy, it seems more likely that CPI is favourable, and markets are bolstered. 7,250 to 7,300 and a return to the convergence of the key MAs are the next clear targets to the upside.

US Markets

US shares closed lower overnight, with each of the three major indices finishing in the red. Tech and growth shares were the weakest performers, giving up much of their gains from the Monday session. US shares perhaps displayed nervousness ahead of tonight’s CPI reading, which will be massive for share price movement moving forwards. CPI is expected to rise in August from July, which is not the trajectory investors will want to see as it could mean more rate rises. Currently 60 percent of economists believe that the US Fed is at peak interest rates, but should this reading come in strong, these numbers could quickly flip the other way. Its hard to call a direction for US shares until these numbers are released, so look for tonight’s reaction to the data.

Only three of the eleven sector groups of the SP500 closed higher overnight, with Energy making strong gains. Technology and Communications stocks saw the most selling.

Technically, the SP500 fell back to the 4,450 support level, which it held overnight. Should the index bounce from here, it should head towards the resistance at 4,525. Should the index break below the 4,450 support, we would expect selling back towards the support at 4,350. Tonight’s CPI data will likely determine the direction the index heads.

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