The XJO is expected to edge higher on open this morning following a small pullback in the U.S overnight. U.S markets were much lower at one point, but managed to retake intraday losses to finish only marginally in the red. With the bulls showing they are happy to step in, our market likely feels comfortable testing all-time high resistance again today. U.S futures are flat.
Yesterday our market opened lower on key support at roughly 8,850. It bounced higher, managing to retake the opening losses and rally all the way back up to all-time high resistance at roughly 8,950. Like we bounced from key support, we also rebounded from key resistance intraday to give up roughly half the day’s gains.
This morning, we are set to test 8,950 again, and given the bullish undertow, don’t be surprised if we push through and make fresh highs. It would be the fifth time our market has made new highs in roughly two weeks – so about half the sessions.
We continue to assume the market will track sideward to higher – albeit with caution and awareness that we are due for a pullback, if not a correction. We could easily see some consolidation as a reluctant attempt from our market to have some mean reversion too.
US Markets
US shares closed mostly lower again overnight, with tech stocks continuing to see profit taking. US shares were strongly lower at points overnight, but they rebounded with intra-day buying bringing prices back to opening levels. US markets were displeased with the Federal Reserve meeting minutes from the last FED meeting, which showed that “a majority of [FED members] judged the upside risk to inflation as the greater of these two risks,”. US markets are pricing in a near certain rate cut in September, but if they don’t get that cut, it could threaten one of the two pillars that is driving global market growth (rate cut expectations). However, the other pillar, US government money printing, is still in full swing and only getting stronger. On Friday night, Fed Chair Powell will speak and this will be the most important remaining event this week, likely deciding whether US markets bounce or sell-off from here.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Energy, Staples, and Healthcare the best performers. Discretionary, and Technology stocks saw the most selling.
Technically, despite overnight selling, the SP500 was able to cling onto the support at 8,400, which was previously the all-time high resistance. The index now seems to be grinding between 6,400 and the all-time high resistance at roughly 6,480. They remain in an overall uptrend. Their recent acceleration that began at the lows of the start of August seems to be running out of steam. The stochastic is now pointing down from overbought area and has crossed, indicating a change in direction. It wouldn’t be surprising to see their market engage in some healthy mean reversion, and return to lower support levels and potential underlying trend lines around 6,300. Finally, the last time they met with the 50 day MA (currently around 6,250) was back at the end of April – so they are due.
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