XJO to jump as US markets continue higher

The XJO is expected to rally on open this morning following a break higher in the U.S overnight which saw their market close into fresh all-time highs once again.

We should open just above 7,800 – flirting with key resistance around these levels. It is difficult to predict whether we will extend the gains during our session today and test 7,850, or simply open strongly and then do little for the rest of the day. U.S futures are flat, so we are receiving no leads from them at this stage. It is also worth noting that over the past week or so, large movements have been mostly reversed intraday, as our market has been reluctant to commit either way. However, the U.S did break higher overnight, which may give our market the confidence it needs to finally pen some gains in ink.

7,830 to 7,850 is roughly where the downtrend line comes in and represents the ceiling of the recent consolidation range. Whether we can push through will likely come down to how the U.S trades going forward. If they can manage to continue higher, our market will likely follow suit (albeit reluctantly). However, it has not been in the nature of the U.S markets to make continued strides of late. Instead, it seems like they break higher for a day or two, and then consolidate for a while. Therefore, it seems more likely at this stage that our market holds these key levels around 7,830 to 7,850. If the U.S does sell off, our market will likely do so also, with very little hesitation. This could look like a move straight back to the comfort of the 50 and 100 day MAs which come in around 7,750.

In essence, though we are set to open higher this morning, we should be mindful that the U.S may not extend their gains, and that our market is likely reluctant to make too much headway. We should expect 7,850 to hold in the short-term, with the all time high at roughly 7,900 as the next key level if it fails.

US Markets

US shares jumped further into all-time highs overnight, with another record close for the SP500. US shares are continuing to rise in anticipation of Fed rate cuts in September, and indeed, overnight economic data was weaker than expected – supporting the idea of rate cuts. US markets have pretty much everything they could want at the moment, though prices are quite high, so further gains might be slower to come. It was a shortened session for US markets last night, and tonight they will be closed for the Independence Day Holiday. The main event for US markets this week remains Friday night’s jobs report, which is expected to show unemployment remaining stable, should the data come out unexpected, it could push things either way.

Seven of the eleven sector groups of the SP500 closed higher overnight, with Technology stock the strongest performers followed by Materials. Healthcare stocks saw the most selling.

Technically, the SP500 is on an overall longer-term uptrend and it closed above the resistance at 5,500 on Tuesday night. 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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