XJO to open flat after US markets give up much of their overnight gains

The XJO is expected to open flat this morning despite a rally in the U.S overnight. Their futures are flat.

Yesterday we were also flat as we grinded along resistance near 7,700. Our market continues to trade in a fashion where we get one or two days of volatility, which is immediately met with meek and indecisive movement. The market remains under strain from the miners, and the financials are starting to show cracks, however with a U.S market maintaining their highs, our market is holding it together (albeit perhaps reluctantly). Any selling is immediately being met with buying, but non-committal beyond retaking what was lost.

Ultimately, we show all the signs of continued sideward movement in a broad range between 7,600 to 7,850. The uptrend line has broken, but we shouldn’t assume that we will start falling from here. The 50 day MA has proven to be a key support which comes in around 7,600 also. Finally, the short-term stochastic have normalised and trading near the oversold area.

US Markets

US shares closed higher overnight, with each of the three major indices closing in the green. There was a lack of major US economic data overnight, and instead prices drifted higher with the current bullish momentum, though nervousness remains ahead of the key Federal Reserve meeting this week. The Fed will meet tonight and tomorrow night and many are worried that the ‘Fed’ will signal that rate cuts are being pushed out in time after a series of inflationary data points across the past two weeks. If this is the case, we would expect further selling in markets. We will know the outcome of the Fed meeting tomorrow night.

Nine of the eleven sector groups of the SP500 closed higher overnight, with Communications the strongest performers, followed by Staples, and Discretionary stocks. Real Estate and Healthcare stocks were the only ones to close lower on average.

Technically the SP500 held below the all-time high resistance at 5,170 overnight, which it may have reversed from. The index is also holding above the longer-term uptrend line that has formed for the past four months. This leaves the index inside a ascending triangle. We will need to see a break of the triangle in either direction before a directional move will look likely.

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