The XJO is expected to open practically flat this morning. The US closed marginally lower Friday night, but we have been largely running our own race over the past week or so. It seems we have been playing a bit of catchup to the US, which has made a couple of fresh all-time highs recently, whilst our market was still several percentage away from our own.
Last week was somewhat tenuous, but each day we finished in the green, with Friday our strongest showing. We settled on 8,900 resistance and it seems we are set to stall there this morning. After five days of gains, it is typical for our market to see some mean reversion and profit taking, so we should expect a selldown imminently, or by the very least, a spat of sideward consolidation. We have also accelerated off the underlying uptrend line, which currently comes in just above 8,750 at this stage, and have been grinding along the top of the Bollinger bands. The Bollinger band mean comes in at roughly 8,800, which is also the next clear level of support. These points make for good targets in the short-term if we do see some selling. Finally, the short-term stochastic are in the overbought area, and are starting to slowly squeeze in, adding further evidence that we should see some short-term cooling soon.
The materials index, in similar fashion also look ready for some short-term profit taking, having accelerated off their underlying uptrend after a strong week of gains. The financials index on the other hand look like they have a bit more room to resistance, but are trading in a channel (or very shallow uptrend) and at their short and long-term moving averages. These two sectors make up over half our market, and so if they work together our market will move. Otherwise, if we see selling in the materials and some buying the financials, our market could translate that to subdued movement depending on the degrees of the sector’s moves.
The week ahead is fairly quiet. Locally, the big news will be our employment data on Thursday. Trump will speak at Davos Wednesday night, but it is hard to suggest the market will care. It seems reasonable to suggest that is now widely accepted, on both sides of the isle, that Trump will often exaggerate, joke, or say things he does not mean. By the very least, it is hard to gain any tangible understanding as to what the administration plans are moving forward from one of his speeches. Of course, if Trumps says anything shocking that could molest the market, like promising to imprison Powell, then perhaps there will be some selling. But even his rhetoric on the weekend around tariffing key European allies has not shifted markets.
US Markets
The U.S opened higher Friday night, but gave up their intraday gains to finish marginally in the red. Their market seems to be pausing at the top of the range as they weigh up current global and domestic environments, both economically and politically – and there is a lot to digest. The bulls remain in control for now, and it seems that the status quo is that they are in a good environment for a sustained move higher. However, narratives can shift, and they can do so on a dime. In the medium term, the U.S is still expecting a rate cut this side of the calendar year, and that dangling carrot has historically underpinned broader market moves. However, the U.S is having political issues both internally and abroad. Furthermore, the Trump administration may pursue criminal charges against Jerome Powell if he doesn’t bend the knee – though it is hard to suggest that much will come about of it, for now.
Most sectors we flat Friday night. Real Estate was the sole sector that managed to extend gains to a percent or more. Health Care and Com. Services faired the worst, but didn’t even get to a percent in the red.
Technically, the U.S is once again trading in a tested ascending triangle pattern. They bounced off their underlying uptrend mid last week and retested their all-time high resistance before stalling. They are getting very close to the point of the triangle, and it seems likely they will need to break it at some point this week. For now, we can only assume their market will break higher and they will once again make fresh all-time highs.
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!