XJO to rebound back to 7,800

The XJO is expected to open higher this morning following a small rise in the U.S overnight. Their futures sit flat.

Yesterday we managed to crawl back most of our intraday losses, bouncing off an underlying uptrend line. We saw the same moves in both our materials and financials.

Ultimately it seems we still want to hang around the 50 and 100 day MAs as a point of comfort for our market. By these metrics, our market is neither overbought nor oversold in the short and medium term – expressing a non-committal environment.

The Materials have found key support and are managing to hold, largely thanks to a stabilisation in iron ore prices. If they do see a rally from here, we might see a rotation out from an overheated financials space, thereby keeping our market rangebound as our two largest sectors move against each other.

US Markets

US shares closed slightly higher overnight, though movements were small. US shares are mostly drifting along their all-time high resistance levels. US government bond yield fell overnight ahead of the key PCE price data release tonight. PCE is the FED’s chose inflation measure, and the drop in yields suggests that investors expect PCE to continue to fall, clearing the way for a FED rate cut in September. This environment remains very positive for the share market, but investors will need to make sure that economic data doesn’t get too weak, otherwise the optimistic earnings growth forecasts might be reduced, which could cause share prices to fall.

Six of the eleven sector groups of the SP500 closed higher overnight, with Real Estate the strongest performer, followed by Discretionary, and Communications shares. Staples saw the most selling, followed by Materials and Financials.

Technically, the SP500 is on an overall longer-term uptrend but it may have found some resistance at 5,500. Should the market close above 5,500, 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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