The XJO is expected edge higher on open this morning following another lacklustre night in the U.S which saw their market finish marginally higher. Their futures are also flat as the they continue to track sideward near their all-time highs.
We managed to retake some losses yesterday, but gave up roughly half our intraday gains to finish just above 7,000. We clearly rebounded off the very short-term downtrend line that has been in play for the past couple of weeks. The flag pattern could still be forming, however we would be looking for a break higher sooner rather than later as confirmation. We would also need to see the U.S commit to new highs.
Retail sales numbers came in soft and as expected yesterday. This shows once again that inflation is not consumer demand driven. These soft numbers at least push the narrative that the RBA has less reason to raise rates further.
US shares closed higher overnight, with each of the three major indices finishing in the green after a whippy session back and forth. Prices rose as bond yields continued to drift lower, with investors happy to buy on the view that interest rates are peaking. There was a lack of major US economic data overnight and movements were relatively small. Tonight however, will see the release of US GDP data for the third quarter, which could trigger directional movement. Expectations are for strong GDP growth during the period, which is not what investors (concerned about inflation) will want to see.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Discretionary the strongest performer, followed by Real Estate stocks. Healthcare stocks saw the most selling.
Technically, the SP500 is on a super-strong short-term uptrend but it may be starting to find some resistance at roughly 4,550 index points. Overall, the index looks likely to continue higher to the yearly high resistance at the 4,600 level. However, a small breather could be seen first, should this occur, the first downside target would be the 4,520 level.
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