The XJO is expected to rally on open this morning following a strong night of buying in the U.S overnight. Their futures have also moved into the green.
We are expected to open just above 8,600, which is practically where our all-time high resistance is. The U.S also moved to their all-time high resistance last night. It would be hard to expect much more from our market today, unless U.S futures drive harder into the green and herald fresh highs in their trading tonight. Otherwise, we should expect most of the rally to occur on open this morning.
Yesterday we reversed opening losses quickly to finish only marginally in the red as we waited for the U.S to move. It seems we have returned to following their market more closely, taking lead from their moves.
It is hard to suggest whether we will break through or not in the short-term. We could easily be seeing a double top forming, or a continuation of the flag pattern. It is hard to know until we see fresh highs or a rebound lower. If our market does indeed make fresh highs, as usual, we should expect a pullback to be imminent.
US Markets
US shares jumped higher overnight, with strong gains pretty much across the board. The SP500 index has now rallied near $15 trillion from its April lows, to return to the February all-time high. Overnight US economic data showed that the US economy was smaller than initially expected, and that prices rose faster than expected, which shouldn’t be very positive. However, these were revised numbers for the first quarter, not the initial readings. This also means that second quarter numbers are likely to look better than they otherwise would (rising off a lower base). Regardless,the most important data point this week will be the PCE (inflation) data from the US tonight. That PCE data will likely determine if US markets break their all-time high or not in the short-term. Bullish investors will be hoping that the PCE prices fall. While a strong PCE number will send markets lower.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Communications, Energy, and Discretionary the best performers. Most sectors saw notable buying, with Real Estate the only sector to see notable selling.
Technically, the SP500 has rallied to the all time high at 6,150. This level would need to break for further gains to look likely. Should it break, we would expect more upside, though its hard to say where it may head to. Should the index fall from here, recent lows aroudn 5,950 are likely to be the downside target.