XJO to open moderately lower after US markets reverse initial gains

The XJO is expected to edge lower on open this morning following a small pullback from the U.S last night.

Our market is consolidating near the bottom of the range whilst it waits and sees how the U.S trades from here. Yesterday, we didn’t feel confident enough to price in their previous night’s gains. Instead, we retested 7,100 but managed to bounce intraday to finish slightly in the green. The U.S likely rebounded off their downtrend line last night, giving up their intraday gains. This likely means that markets will retest support in the coming sessions and that a relief rally is not on the books just yet.

In essence, markets are waiting for Powell to talk Friday night so we could very well continue sideward for the rest of the week.

US Markets

US shares closed mostly lower overnight, with the DOW JONES and SP500 finishing in the red, while the NASDAQ managed a small gain. There was a lack of major economic data and news overnight, so instead markets continued to focus on their main headache, which is the potential for further rate rises. This fear will be addressed somewhat later this week, with the Federal Reserve’s policy meetings. The Fed is expected to announce their views on the likelihood of further tightening, and this could trigger further directional moves in share prices.

Only four of the eleven sector groups of the SP500 closed higher overnight, with no sector enjoying strong gains. Financials and Energy stocks saw the most selling.

Technically, though the SP500 remains on a downtrend it seems to have bounced off a potential support level around 4,325. The index may have fallen after reaching the downtrend line overnight. Should the index find the strength to close above the downtrend line (which currently sits at 4,410), it should rise to the potential resistance at 4,450. Should the index keep falling from here, the recent support at 4,325 is the level to watch.

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