The XJO is expected to open flat this morning despite a pullback in the U.S overnight. U.S futures are also flat.
Yesterday we managed to retake opening losses after rebounding off key support at roughly 8,650. This support represents the bottom of the recent consolidation range. We finished practically flat yesterday, finishing on roughly 8,700 – a level that our market has been attracted to which represents the middle of the range. 8,750 resistance is the top of the range, which also represents our all-time highs.
The underlying trend remains bullish, so we should eventually expect the consolidation range to break higher, as it did a couple of weeks ago. Of course, a catalyst could cause some swift selling and a break lower, but until we see otherwise, we can only assume the market will continue on trend.
We have local CPI data this morning at 11:30am, which is expected to come in lower than the previous readings. CPI is returning to a stable range, which fuels the belief in further rate cuts. Expansionary monetary policy is likely the main reason our market has rallied the past two years, so further reductions in CPI today should keep our market happy. Of course, if CPI is stronger than expected, our market may feel a little disgruntled. Though we have tended to hand wave away any bad news lately.
Finally, the U.S has GDP tonight. It is expected to rebound strongly from half a percent in the red to over two percent in the green (QoQ). Their market will likely appreciate the stability.
US Markets
US shares were flat to slightly lower overnight, with the SP500 index stalling out at a potential resistance level. The stall in US markets is unsurprising given that there wasn’t a whole lot of major data and events overnight. However, the biggest events of the week will occur tonight with US GDP and a FED meeting/interest rate decision. We expect a high likelihood of directional movement on tonight based on the outcomes of those events, in particular, the FED meeting. While rates are expected to be held, investors are keen to see if chairman Jerome Powell has begun to lean towards a rate cut at the next meeting in September.
Four of the eleven sector groups of the SP500 closed higher overnight, with Real Estate, Utilities, and Energy the best performers. Industrials stocks saw the most selling, followed by Discretionary and Healthcare.
Technically, the SP500 after breaking the previous all-time high resistance at 6,300 the market has risen to, and stalled out at 6,400 points overnight, which may now be the new resistance level. The previous resistance at 6,300 is now likely to act as support.
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