The XJO is expected to open lower today after moderate selling in the US overnight. US shares fell on little news, though after recent strong gains, some profit taking there shouldn’t be unexpected. US shares are also about to enter a company earnings reporting season and earnings may struggle to justify current valuations.
Yesterday our market again opened around 9,000 index point level before falling from this level intraday. The index has been holding a short-term accelerated uptrend line that has been in play since our recent lows. Combining this uptrend line and resistance and we are inside an ascending triangle. We would have to break out of the triangle for further directional movement to look likely.
Should we break above 9,000, the next resistance is at roughly 9,050, which is not too far away and which could break if we close above 9,000. If the U.S markets push higher, there is a good chance we push through and follow into fresh all-time highs. We need to get there first, but our market looks on trend.
However, in the absence of US gains, our market does look like its willing to fall. So should the US fail to proceed, we will likely break the short-term uptrend and fall back to the previous reistance at 8,890, which we will test as support.
US Markets
US shares closed lower overnight, with selling across the three major indices. There remains little in the way of US economic data given the reporting has been postponed due to the US government shut down. Instead we perhaps saw some repositioning ahead of the third-quarter earnings season, which is beginning now. Earnings will have to be pretty good to justify current prices, so it is understandable some investors will be worried.
Staples was the only sector to close higher on average overnight, with every other sector finishing lower. Materials, Industrials, and Energy stocks saw the most selling.
Technically, the SP500 fell back to its uptrend line overnight. In the prior session it returned to and stalled at the highs of the past week at 6,750. The index has been on a strong short-term and long-term uptrend and had a strongly bullish week last week that saw the index break above several potential resistance levels. However, the index has failed to close beyond the levels of the prior four sessions however, and so has not shown a sign of further bullishness. Instead it has stalled out at roughly 6,750, now looks to be resistance. The index remains on an uptrend, but it would have to close beyond this level for further gains to look likely. The index would have to break back below 6,700 for selling to look likely. The stochastic is also looking toppy up here.
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