The XJO is expected to rally on open this morning following a strong night of buying in the U.S. Their futures are flat.
Trade talks went well. China and the U.S will reduce their tariffs to more reasonable levels for the next 90 days.
Yesterday our strong open was mostly shed in our morning session. We pushed through the top of our recent consolidation range at roughly 8,250 but by the end of the session we pulled back underneath to finish flat.
Our expected open is roughly 8,330 as of writing. Don’t be surprised if we test 8,350 resistance or even 8,400 – our market has been rather optimistic lately.
The short-term sugar rush from the trade deal could easily be compounded with further belief that rate cuts are coming. Inflation inducing tariffs were a key factor in the recent hawkish stance of the Fed. With Trump now capitulating to China, perhaps markets will see little reason for the Fed not to cut now. U.S CPI numbers tonight will likely bring that speculation to the forefront.
Now that the U.S is “back” we may see some overseas capital leave our safe havens and return to the largest economy in the world. Especially considering we have outpaced them in the short and medium term. This could mean that we return to how our market typically trades which is much more subdued and cynical compared to the U.S.
Regardless, it seems like the rally is back on. We should continue to expect the trend to hold and for further gains to come.
8,350 to 8,400 is the next key levels to watch. Then basically every 50 points from there until we reach our all-time highs at roughly 8,600. A month ago, these targets seemed absurdly optimistic. Now, they seem almost likely.
US Markets
US shares skyrocketted overnight, with prices jumping after the US and China announced they would scale back their tariffs practically to pre-trade war levels. It really does look like Trump blinked first and has backtracked on his trade war as a result of the negative response from markets and particularly the bond market. While prices have no doubt risen on the optimism of this deal, it does beg the question, why was this all done in the first place? Additionally, plenty of economic damage has now been done, particularly to smaller businesses in the US, who couldn’t route imports through other nations or hold good in warehouses before officially importing them.
Ten of the sectors of the SP500 jumped strongly overnight, with Discretionary, Technology, and Communications the best performers. Only Utilities closed lower, while most sectors saw notable gains.
Technically, the SP500 gapped through the potential resistance and previous peak at 5,800. This is a technical bullish signal, with the all-time high around 6,150 now a realistic technical target.
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