The XJO is expected to open flat this morning.
The U.S was down again last night, albeit marginally. U.S futures have moved into the green, and their move last night saw them stall at a potential uptrend line. Perhaps they are due for a bounce – though who cares – our market is unashamedly and obnoxiously running its own race.
Yesterday our market broke into fresh highs once again, holding the gains just above 9,000. That is the fifth session in the past twelve sessions that has seen our market make fresh all-time highs. Insane. All the while the U.S been largely tracking sideward and pulling back.
For a moment there it looked like we were going to see some mean reversion of short to immediate term indicators, but our market is clearly happy to remain overbought by most metrics for now.
When our market makes fresh highs, in modern history, it typically pulls back the next day or has a breather for a few sessions. However, that seems less so the case of late. It does feel like we are nearing a precipice but for now we should continue to assume the market will continue to trade sidewards to higher.
US Markets
US shares closed lower again overnight, with prices falling for the fifth straight session. US shares fell with US jobless claims continuing to rise and with markets nervous ahead of Jerome Powell’s speech tonight at the FED’s policy symposium. US markets have priced in a near certainty of a FED rate cut in September, yet FED chair Powell has consistently warned that nothing is guaranteed, and that inflation is starting to tick higher. Investors are therefore nervous that he could say something tonight that causes a rethink on the likelihood of a September cut. Regardless, US shares were also strongly overbought after the rebound since April, so a move back to set a higher trough shouldn’t have been too unexpected. As mentioned, tonight will be Powell’s speech, which will influence the next directional move for markets.
Only two of the eleven sector groups of the SP500 closed higher overnight, which were Energy and Materials stocks. Every other sector closed lower to some degree, with Staples and Utilities the worst performers.
Technically, the SP500 pushed below the support at 8,400, which was previously the all-time high resistance. The index remains in an overall uptrend. Their recent acceleration that began at the lows of the start of August seems to be running out of steam. The stochastic is now pointing down from overbought area and has crossed, indicating a change in direction. It wouldn’t be surprising to see their market engage in some healthy mean reversion, and return to lower support levels and potential underlying trend lines around 6,300. Finally, the last time they met with the 50 day MA (currently around 6,250) was back at the end of April – so they are due. As long as the current move lower bounces above 6,220, we will see another higher trough which indicates eventual further upside.
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