The XJO is expected to edge higher on open this morning despite a pullback in the U.S overnight. U.S futures are flat.
The bulls remain firmly stoic. Yesterday our market managed to rally from the bottom of the consolidation range, straight to the other side of the channel. We tested resistance at roughly 8,750, but managed to peak our head through, giving hope of a confirmed break today.
Despite the massive issues in the U.S, and their bearish night, our positive open this morning is testament to just how strong our market is. We are helped by the falls in the U.S being largely driven by tech, which is not well represented in our market. Rather, our two largest sectors are our materials and financials, which make up about 55% of the index. The materials in the U.S were up almost a per cent, which coupled with our move above 8,750 yesterday, helps partially explain our market’s defiant move into fresh all-time highs this morning.
Keep in mind that our market rarely makes consecutive all-time highs with good pace. If we finish firmly in fresh all-highs, we can comfortably expect our market to either pullback the next day, or within a handful of days of consolidation. This happened most recently when we broke out of the ascending triangle on the 18th of July.
Following that break, our market continued to use that fresh high of 8,750 as key resistance. Couple with the underlying uptrend line that remains firmly in play, our market continues to trade in an ascending triangle. Once again, we are set to break out of it in the direction of the underlying trend. At this stage, we should continue to assume our market will continue to move sidewards to higher until we see otherwise or at least until reporting season gets underway. Our market will have a hard time justifying the stretched valuations, but for the past six months at least, it has largely ignored everything. It has had blinders on, keeping its sole focus on expansionary monetary policy.
US Markets
US shares closed lower overnight despite an initial rise on open, and despite yesterday’s bullish bar. US shares fell with weak US economic data overnight, with the ISM non-manufacturing PMI lower than expected, but with non-manufacturing prices rising more than expected. US shares have recently seen a bit of selling with weak economic data, including rising unemployment, but they had a strong positive session on Monday with the belief that interest rates would be cut as a result. However, if goods and services prices rise by more than expected (inflation), it will be hard for interest rates to be cut.
Four of the eleven sector groups of the SP500 closed higher overnight, with Materials the best performers. Utilities stocks saw the most selling.
Technically, the SP500 has recently held the potential support at 6,220 and did bounce off this level. Given the bounce and despite overnight selling, we could now see the index rise from here. The index remains on an uptrend, with higher peaks and troughs (though the uptrend line has broken). A break below 6,220 would see a lower trough however, and would call the uptrend into question.
Want to continue reading?
This is only an excerpt from todays TradersCircle Members Morning Market Update and doesn’t include the key data and charts our traders are keeping an eye on every day. Become a member today for this plus full length mid-day and end of day updates, trade recommendations, trade group webcasts, and much more!