The XJO is expected to open higher once again, following a continued rally in the U.S overnight. Their futures are flat.
We should open near 7,900. This will mark the third day in a row of gains since reaching our lows at roughly 7,750. Our market has not marked more than two days of gains since the falls began mid-Feb, so this morning’s move is a welcome sign that we have reached the bottom (at least for now).
We convincingly broke the accelerated downtrend line yesterday, but this morning’s move will have us test the broader underlying downtrend that has been in play since our highs. Considering the current environment, it would be hard to suggest that the downtrend line will break. Indeed, we should assume the recent rally is simply some mean reversion before selling resumes.
US Markets
US shares continued to rise overnight, with another gain across the three major indices. US shares saw strength after data showed retail sales were slower than expected in February, potentially increasing the possibility of rate cuts. The US Federal Reserve will meet this week, though rate cuts aren’t expected at this meeting, they may state that will economic data slowing, rate cuts are a possibility soon. However, the big risk now for US markets is the prospect of a recession, and if the Trump tariffs remain in place for any length of time, that prospect will become increasingly likely. Markets have had some optimism in the short-term, but until the tariff situation is resolved, a full rebound is unlikely.
Ten of the eleven sector groups of the SP500 closed higher overnight, with only Discretionary stocks closing lower. Real Estate, Energy, and Staples stocks were the best performers.
Technically, the SP500 has broken below and has now fallen to the level of a technical correction (10% fall from the peak), which comes in around 5,540. Should the market continue to rebound from here, the previous support at 5,800 – 5,850 is likely to act as resistance. From a more medium term perspective, the index now looks like continuing lower to the next downside level, which would be previous support at 5,420.
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