The XJO is expected to rally on open this morning, near 9,075 at time of writing. This follows a rebound in the U.S overnight which saw their market reverse their previous session’s losses to finish firmly in the green. However, they remain in even a tighter consolidation pattern now, bouncing between key support and the 50 day MA. Uncertainty is clearly underpinning their recent moves, with little indication which way they will break.
Our market seems eager to make fresh highs, and the only thing that has been holding us back is the U.S. With the tariff tantrum over the weekend, and negative U.S futures on Monday, of course our market sold off. But now that the U.S has shown stability, our market once again seems set to test all-time highs. This will be the fourth test in quick succession. Typically, the fourth or fifth test of the resistance line would lead to a break, so if the U.S can at least hold ground, our market seems set to make fresh highs.
Indeed, it feels like the market needs to make fresh highs to actually fall. It’s a curious sentiment, but once our market makes fresh highs, we will have reached our mark, and will be in a position to actually price in all the negativity we have been ignoring to get to this point. This tracks with the theory that our market in recent years has been unwilling to make fresh consecutive all-time highs.
We have CPI numbers today which could throw everything up into the air. Of course, if they come in stronger than expected our market will have a hard time holding ground. Otherwise, it might just be business as usual (despite rate hikes on the horizon – but our market doesn’t seem to care for now).
US Markets
US shares rebounded overnight, retracing most of Friday’s selling, with some of the recent AI-worry related selling reversing course. It came after Anthropic said its new artificial intelligence tools were being developed with partners to help them customise their specific software, not to replace it. Monetary policymakers also weighed in on AI’s potential impact on the labor market. Federal Reserve Governor Lisa Cook said the technology could lead to a possible rise in the unemployment rate, while Fed Governor Christopher Waller said he does not expect AI to disrupt the labor market. Tonight after US markets close, NVIDIA will announce their quarterly earnings. With so much of global investment hinged on AI, investors will be looking for clues on spending trends in the NVIDIA report. It will therefore be extremely important in directional share price movements moving forwards.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Discretionary, Industrials, and Technology the best performers. Only Healthcare and Energy stocks closed lower on average.
Technically, the SP500 is drifting sideways along the support level at 6,800. With the index now potentially in a channel between this support and the all-time high at 7,000. However, for the past week it has been unable to break above the middle of the channel at 6,900, which is also where the 50-day moving average sits. Given the continued bullish market, we have to assume that we will see an eventual push through 6,900 and on the the all-time high. Should the market break below 6,800, that is where we could see more selling.
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