The XJO is expected to edge lower on open this morning – a mild reaction to a strong rebound from resistance in the U.S overnight. Our market continues to simply run its own race. U.S futures are flat.
Yesterday we gave up opening gains to finish practically flat. It is fair to say we are testing all-time high resistances around here, not willing to commit. It seems we are reluctant to push through resistance without some further commitment from the U.S, but also happy to pause here whilst we wait and see. Perhaps we are waiting for their market to respond to jobs data tonight, and not willing to commit to anything prior to the weekend. Furthermore, their Financials and Materials (our two dominant sectors) were only about half a per cent lower. However, it would still be reasonable to expect some weakness today unless U.S futures push hard into the green.
8,500 to 8,450 is now key support, and the uptrend line comes in at similar levels. If we do indeed go on to make fresh all-time highs, we should expect our market to pullback quite quickly. Often, the market will do so either the very next day, or within a handful of days of consolidation. It very rarely continues to make consecutive highs, especially in an environment where the market looks tired and overbought.
US Markets
US shares closed lower overnight after a big drop from Tesla, with the shareprice falling due perhaps to personal disputes between Trump and Elon Musk. With both taking jabs at the other. Musk accused Trump of being linked to Jeffrey Epstein files and stated that he should be impeached. While Trump said that Musk was asked to leave after going ‘crazy’ due to his EV subsidies being removed. US economic data overnight was also pretty poor, with a rise in jobless claims and a drop in labor productivity. While all of this should be negative for markets, after US markets closed (and perhaps fearing market selling) Trump called Chinese President Xi JinPing and asked for further trade talks. As a result, US futures have come back into the positive. Tonight we will see the full US jobs report, and the market does not want to see a downturn in the labor market.
Ten of the eleven sector groups of the SP500 closed lower overnight, with only Communications edging out a small gain. Discretionary, Staples, and Materials stocks saw the most selling.
Technically, the SP500 has has stalled at last week’s peak at roughly 5,975. The index has stalled at this level for the past week or so. This level would need to break above for further gains to look likely. Should that level break, the next target is 6,000, which isn’t too far away. The index would need to break below its uptrend line to look bearish.
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