The XJO is expected to open lower this morning following another lacklustre night of trading in the U.S. Their futures are also flat.
Yesterday we managed to retest key resistance at roughly 7,830. There is also a downtrend line that comes in at similar levels which we are likely still flirting with. Without continued strength in the U.S, our market will rebound off these key levels with our expected open at roughly 7,800.
It seems reasonable to expect a move back towards the middle of the range at 7,750 which is also roughly where the 50 and 100 day MAs come in.
It is starting to feel like we are creating similar level peaks, but our troughs are getting higher. This would be early signs of an ascending triangle and fit the narrative of our market being dragged higher by the U.S, but unable to break through resistance.
Regardless of the minutia, it is clear our market remains rangebound for now. Tomorrow night we have U.S CPI which could certainly shake things up.
US Markets
US shares closed fairly flat overnight, with the SP500 managing to eke out a small gain. Prices initially traded higher but drifted lower throughout the session to close only slightly in the green. Still, it was the fifth all-time high close for the SP500 in a row. Overnight we saw Jerome Powell start his testimony in front of Congress, and that will continue tonight. Jerome was as dovish as usual, stating “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.” Overall, it seems that Jerome is signalling a September cut, which is helping the US market hold strong. The next major test for the market will be the CPI reading on Thursday night, and then the company earnings reporting season, which kicks off on Friday.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Financials the strongest performers, followed by Healthcare stocks. Materials stocks saw the most selling, followed by Energy stocks.
Technically, the SP500 is on an overall longer-term uptrend and it closed above the previous resistance at 5,500 last week. This suggests the buying should continue and its hard to say where it will stall. Should we see selling, the previous resistance at 5,375 is now likely to act as support; should it break, we are likely to see further selling.
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Advisor at TradersCircle and Emerald Financial
Joining the team at TradersCircle in 2011, Karo has extensive experience in both investing education and derivatives trading.
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