The XJO is expected to open lower this morning following a pullback in the U.S overnight. They were long due for some profit taking, and Trump signalling his commitment to tariffs overnight likely triggered it. Their futures have also moved a decent measure into the red.
We should open near 8,550. If U.S futures remain grim during our session today, it would not be surprising to see that selling extend. We are also clearly rebounding off the key resistance that roughly represents our all-time highs and the top of the channel.
The move lower today will also break the short-term ascending triangle. The triangle pattern articulated the bullish pressure our market was feeling, clashing against the all-time high resistance we refused to break. With the break lower today, it means the channel is once again the dominant pattern. The next key level is the bottom of the channel which is somewhere around 8,500 to 8,450.
Trump is infamous for doing backflips and bending the knee to capital markets. So much so Wall Street has coined it the T.A.C.O trade. Therefore, recent history would suggest that if markets continue to selldown, Trump will either remove the tariffs or extend the deadline. Furthermore, markets are becoming somewhat inoculated to the Trump effect, and the severity of their reactions seems to be lessening. Of course, the complete opposite could be true, and markets could be in for another correction. It is always hard to predict what the current POTUS will do or say next, and more importantly, how markets will react.
The big news this week comes in the form of an expected RBA rate cut today at 2:30pm. The RBA haven’t committed to a cut, but that hasn’t stopped the market from expecting one. We may be in for an upset, either in the form of the RBA holding, or by suggesting that we shouldn’t expect anymore after today for a while. The expectation of a cut in August is already declining as it seems likely they have brought it forward to July (if they do indeed cut).
US Markets
US shares closed firmly lower overnight. Their futures closed lower on Friday (when their market was closed for Independence Day) but the futures bounced back on Monday morning. This was due to US Treasury Secretary Scott Bessent stating that the tariff pause would be extended again. US shares looked set to open flat overnight as a result. However, Trump threatened further tariffs against Japan and South Korea, and the tariff extension was perhaps not as long as some had hoped. The new date for the return of reciprocal tariffs is now the 1st of August, although one would expect it unlikely that date holds as well. The next major scheduled event for US markets will occur tomorrow night with the Fed meeting minutes, which should provide clues as to how likely US rate cuts are in the near term.
Two of the eleven sector groups of the SP500 closed higher overnight, with Utilities and Staples edging out slight gains. Every other sector closed lower, with Energy, Materials, and Discretionary the worst performers.
Technically, the SP500 has recently pushed through the previous all time high resistance at 6,150. With this level breaking, we would expect further upside, though we did see a bearish candlestick overnight, which could indicate a move back to the previous resistance at 6,150 which may now be tested as support.
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