The XJO is expected to open flat this morning despite a moderate pullback in the U.S overnight. Their futures are flat.
We didn’t really price in U.S gains yesterday. Instead, we continued to selldown after practically rebounding from all-time high resistance the previous session. It’s not therefore surprising to see our market flat this morning despite the selldown overnight.
A tentative accelerated uptrend line from our recent lows may be in play. It comes in around these levels, and we will either confirm or deny it in the coming sessions. We may bounce from it and retest all-time high resistance, or we may not worry and either continue the selldown or consolidate at the top of the range. With the U.S tracking sideward and starting to show weakness, the middle and latter seem more likely for now. Furthermore, our immediate term indicators suggest the market is overbought, though they have started to normalise with the past two sessions of consolidation.
A broader channel pattern has started to potentially form. We may also be seeing the beginning of a broader double top. Both will need confirmation, and both rely on all-time high resistance holding.
US Markets
US shares closed a little lower overnight as the run of consecutive bullish days for the SP500 came to an end. The SP500 had risen for seven days straight so a day of profit taking shouldn’t be unexpected, especially considering the government shutdown. This week will be a pretty quiet one for US economic data, if it is even reported at all given that most data is not being reported with the shutdown. 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.
Five of the eleven sector groups of the SP500 closed higher overnight, with Staples the best performers. Discretionary and Communciations stocks saw the most selling.
Technically, the SP500 fell back to its trend line with the overnight profit taking. 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. For the prior three sessions however, the index has not shown a typical bullish candlestick, and instead it reversed from the intra-day 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.
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