The XJO is expected to edge higher on open once again this morning despite a pullback in the U.S overnight. U.S futures are slightly in the red.
Yesterday we managed to hold two thirds of our intraday gains into the close, rebounding off key support at 8,200 and the 50 day MA.
We are set to extend those gains today, with an expected open near 8,250. With the U.S being down overnight, and their futures moving into the red, don’t be surprised if that positivity is fleeting – especially considering how willing we have been to pullback lately. Indeed, it is sort of surprising to see green in our futures following the U.S pullback last night. Perhaps we have settled around the comfort of the 50 day MA, and even though the U.S was down overnight, they are still tracking sideward in a tight consolidation range near their all-time highs. Earlier in the week it was likely that we were expecting some profit taking from the U.S, but we haven’t really seen that.
Unemployment came in slightly worse that expected. Less jobs were created and the participation rate decreased – however our unemployment rate remained at 4.1% (full employment). The market didn’t seem to care, but perhaps some of our positive open this morning despite the pullback in the U.S overnight is attributed to the slightly weaker job numbers.
Overall, we remain sidewards. We should continue to assume that the broader uptrend will continue, but it feels like there is less positivity underpinning our market and we could be witnessing the beginning of a change in trend. In the shorter-term it is hard not to see anything else bar sidewards movement.
US Markets
US shares closed lower overnight, with each of the three major indices closing in the red. US shares saw selling with continued strength in economic data, which has seemingly reduced the chances of rate cuts moving forwards. Indeed, overnight, jobless claims data was better than expected and producer prices also rose by more than expected. The concern is that with the US government effectively printing money at the fastest ever rate, we might not see inflation continue to fall. Indeed, after US markets closed, Fed Chair Jerome Powell stated that The economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully. Ultimately, the path of the policy rate will depend on how the incoming data and the economic outlook evolve.”, which is a bit of a depart from the more dovish previous statements. US shares look very expensive at current interest rates, so if interest rate cuts don’t continue, they could see selling.
Only two of the eleven sector groups of the SP500 closed higher overnight, with Energy and Utilities finishing higher. Every other sector closed lower, with Discretionary, Healthcare, and Industrials the worst performers.
Techically, the SP500 has been unable to push above a potential resistance around the 6,000 point level. Should the index continue to fall in the coming sessions, it could fall back to the previous all-time high at roughly 5,880, which may act as support. Should the index rise through 6,000, that would indicate further gains.
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