The XJO is expected to open higher this morning following a small rally in the U.S overnight. Their market moved back to their all-time high resistance and stalled. Their futures have moved into the green.
We should open near 8,975, but don’t be surprised if our market moves closer to our all-time high resistance at roughly 9,050 through the day. The bulls remain firmly in control, and recently, we haven’t needed much of an excuse to rally. We could easily see our market back at its highs with the expectation of a break higher in the U.S tonight. Furthermore, we are bouncing off a small uptrend line we have been following since roughly the start of August, and immediate term indicators have had a chance to let off steam and normalise over the past few sessions (albeit only marginally).
We continue to expect the market to trade sidewards to higher. Of course, the market is overvalued and due for a correction, so caution and awareness should underpin your trading. Today we have weighted mean CPI at 11:30am (AEST) – which can easily trigger movement. The market will want to see CPI come in as expected, if not lower than expected. If CPI comes in higher than expected, it should lead to some marginal selling. Unless the reading is quite poor, there doesn’t seem like much that can convince this market it isn’t getting rate cuts.
US Markets
US shares rebounded overnight, with prices rising back towards the all-time high resistance levels that were reached on Friday. The move came later in the session, with prices initially trading lower. This is despite Trump trying to fire one of the members of the board of the Federal Reserve, a move that greatly threatens the central bank’s independence. Evercore ISI said: “We think asset markets are not properly priced for what increasingly seems likely to be a rupture in Fed independence and the policy reaction function in 2026.” US markets have drifted back to the highs ahead of some major events in the final sessions of this week. Tonight, the world’s largest listed company NVIDIA will release quarterly numbers, which will no doubt move markets. Finally, on Friday night we will see the latest US inflation (PCE) data, which will also trigger movement.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Industrials, Financials, and Healthcare the best performers. Consumer staples stocks saw the most selling.
Technically, the SP500 is trading just below all-time high resistance at 6,480 overnight. The index jumped strongly to this level on Friday with the dovish comments from Powell. The index remains in an overall uptrend and we could expect this level to break and for a new higher resistance (higher peak) to form. Though we expect it, we will need to wait for a breakout for confiration. A close above 6,480 therefore indicates further gains. With the index selling for most of last week (up until Friday’s big gain), that does provide some runway for the index to move higher. Additionally, the stochastic also fell over that time, but it has now crossed, and turned to point higher from the lower end of its range, indicating further gains.
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