The XJO is expected to open flat this morning following despite a small rally in the U.S overnight which saw their market once again close in fresh highs. It seems clear though that their market is running out of steam, or by the very least taking a breather. Their futures are flat.
Our market yesterday managed to virtually reach all-time high resistance at roughly 9,050. However, it seems likely we rebounded off it intraday and sold down through the afternoon to finish practically flat – a clear indication that we are unwilling to commit to fresh highs for the moment. Our lacklustre opening points to a market that is pausing and waiting to see if further highs are warranted.
It would be hard to argue that they are. Our market is looking overbought in the immediate term, and fundamentally it remains hard to justify these levels. But standing in the way of our market’s momentum for much of this year would have been a widow-maker, so it wouldn’t be surprising to see us above 9,050 soon. Of course, the U.S would likely need to continue paving the way.
US Markets
US shares were again mixed overnight, with strength in Technology, Communications, and other growth stocks dragging the SP500 and NASDAQ into the green, while the DOW JONES closed lower. The US government shutdown is still ongoing, but it seems to be having little effect on the market, which remains in a very bullish slant. The SP500 index notched its seventh straight gain in a row, so one would assume that some profit taking would come in soon. However, even the shutdown hasn’t triggered some uncertainty. This week will be a pretty quiet one for US economic data, if it is even reported at all. However, it will herald the start of the company earnings reporting season, which begins in earnest on Thursday and Friday. Last earnings season was fairly positive, allowing markets to push a bit higher. This time around we will have to wait and see.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Discretionary, Utilities, Communications, and Technology the best performers. Real Estate stocks saw the most selling.
Technically, the SP500 has continued higher after a strongly bullish week last week that saw the index break above several potential resistance levels. For the past three sessions however, the index has not shown a bullish candlestick, and has instead reversed from the highs showing a potential reversal signal. The index remains on a short-term and longer-term uptrend and has recently pushed through the resistance of 6,700. This suggests further upwards movement. The index would have to break back below 6,700 for selling to look likely. The stochastic is also looking toppy up here, but it would need to turn and cross to point lower before it would confirm a reversal.