The XJO is expected to open flat this morning. The U.S was up overnight, but they rebounded from both their downtrend line and the key level of resistance intraday. By close, they had given up half of the session’s gains. Their futures have moved into the red.
Yesterday our market managed to finish firmly in the green. We hung around 7,950 for much of the session, but pulled back slightly into the close. We have gotten ahead of ourselves, so despite the U.S finishing in the green overnight, it makes sense to see our market pause today and take a breather.
8,000 remains key resistance. We practically tested the 8,000 level on open yesterday, but didn’t have the conviction to push through, or even flirt with it aggressively. 8,000 is also where the 50 day MA comes in, so we should expect it to remain a firm upside target, but also a tough resistance for our market to break in any good measure.
Short-term stochastic also put us in overbought territory. They look ready to cross and seem to be turning over. Coupled with the extraordinary strength we have seen in the face of U.S adversity, it would make sense if we did see some selling soon.
7,850 represents key support. We pushed through it as resistance yesterday, and we should only expect it to hold if the market consolidates. Otherwise, 7,750 seems like the most reasonable target if we do see some meek profit taking.
US Markets
US shares closed higher overnight, though the index closed below its opening level and well below the highs of the session. It could be that the SP500 reacted to the downtrend line and resistance level around 5,470. Should we see a bearish candlestick from here, that would indicate further selling. US investors have been buoyed recently by comments from Trump waving the white flag in the trade war with China, and by changing his mind on his willingness to fire Fed Chair Jerome Powell. Still, markets remain rattled by how much economic damage may have been done, and with company earnings starting to come in a bit weaker than expected. While the volatility might slowly subside from here, its hard to see markets pushing straight back to their levels of January/February.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Technology, Discretionary, and Communications the best performers. Most sectors saw reasonable gains, with only Energy and Staples closing lower.
Technically, the SP500 rose up the major downtrend line overnight, from which it bounced down, suggesting a hold of trend. From a wider perspective, the index is inside a descending triangle between the downtrend line and the support level at approximately 5,000. Should we see a bearish bar from here, that could indicate a fall back to 5,000.
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