The XJO is expected to edge higher on open this morning despite a flat U.S overnight. Their futures are also flat.
Yesterday we opened lower, but once we got past the morning session, our market started to retrace the intraday losses to finish around 8,350 – a key level historically and one our market has been trading around recently. 8300 is key support, we bounced off it intraday yesterday, and 8,400 is the top of the recent consolidation. In essence, we are tracking sidewards in a tight range, but with a slight bullish tilt.
Markets have been running out of steam for the past few weeks. Unlike the U.S though, our market is clearly reluctant to selldown. Since early April, at our lows, there has only been eight days of selling out of thirty sessions. Furthermore, that selling has been meek and often reversed intraday. In fairness, some of our rally has been too.
Regardless, it is clear the market is waiting for further information. There are plenty of storm clouds brewing in the distance. The media is turning its focus to troubling long end bong yields both locally and overseas. Even though markets are still expecting rate cuts, there may be more headwinds than tailwinds that cause central banks to pause. Either way, markets are unsure of what to do next, clearly.
We should assume the market will continue higher from here, albeit in a slow trudge. The trend remains bullish, and until we see otherwise, we should assume it will hold for now. Because it is shallowing out quite a lot, we should be mindful that selling could be around the corner.
US Markets
US shares closed fairly flat overnight, with little change across the three major indices. Prices were higher at points earlier in the session, but they came back to flat. US markets perhaps reversed with the passing of a US government tax bill that will accelerate the US government deficit – which is starting to risk spiralling out of control. Indeed, US government bond yields have been rising, with investors starting to demand a higher return due to a percieved increase in risk in holding US government bonds. Overnight economic data was fairly positive, with PMIs showing growth, and jobless claims stable. However, with the strong PMIs, The overall rise in prices charged for goods and services in May was the steepest since August 2022, which is indicative of consumer price inflation moving higher. US markets do look a bit overbought in the short-term after six weeks of rebounds, so don’t be surprised to see some profit taking here.
Three of the eleven sector groups of the SP500 closed higher overnight, with Discretionary the best performer. Utilities, Healthcare, and Energy saw the most selling.
Technically, the SP500 remains firmly in an uptrend. In the short-term they look primed to reach 6,000. Should that level break, the next upside target would be the roughly all-time high resistance around 6,150. Currently though, the gradient of the trend remains too steep to be sustainable, and immediate term indicators like the stochastic remain heavily overbought. Should we see a pullback, the first downside target is likely to be the previous resistance at roughly 5,800.
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