The XJO is expected to edge lower on open this morning. The U.S was up overnight, retaking intraday losses to finish in the green. Their futures are flat.
Yesterday was one of the weirdest days we have seen. We rallied aggressively throughout the session following a muted open. At one open point we were trading at roughly 8,450, smashing through all-time highs on what felt like no tangible reasoning. We believe it was the compounding of algorithmic trading and short-squeezing which led to the irrational rally, but it is hard to be sure.
No doubt participants were readjusting their positions in the confusion as we broke into fresh highs, but in twisted irony, the market ended up pulling back to settle on our previous all-time high at roughly 8,375. In the end we shed almost half of the intraday gains by the close. Much of it was even done in match after 4pm.
The recent run since the start of November seems to be forming a short-term uptrend. We have seen both a higher trough, and now soon to be a higher peak. Even though our market seems to love tracking sideward, we have maintained a position that the trend remains positive and that we must assume fresh highs are on their way. For a moment there it seemed like the mood has changed, but the rallies over the past few days must be leaving many scratching their head.
We should expect key resistance to hold today, but anything is on the table at this stage in what is a highly unpredictable market.
Finally, much of the irrationality of our market is from the financials, led by the major banks, which have unashamedly led the charge. They are the most expensive they have ever been, and it is fair to say that they are trading in a massive bubble.
US Markets
US shares closed mixed but mostly higher overnight, with the SP500 and NASDAQ finishing higher on the strength of technology shares. Meanwhile the DOW JONES finished lower. Prices initially traded lower but they rebounded late in the session to finish higher. There was a lack of major news and events and instead investors flocked to NVIDIA ahead of its report tonight. NVIDIA has grown to be one of the largest companies on earth due to demand for their computer-chips, which are helping to power AI. The AI story is one justification analysts are giving for the current market bubble, so should this report come in better than expected, it will likely trigger further share buying. Should the report disappoint, we could see some profit taking for global shares.
Six of the eleven sector groups of the SP500 closed higher overnight, with Technology the strongest performer, followed by Communications shares. Energy and Financials stocks saw the most selling.
Techically, the SP500 looks to have bounced off support at the previous all-time high at roughly 5,880. Given a bounce off this level, we could see a move back to the recent resistance around the 6,000 point level. Should this level break, we could see a move all the way back to 5,760.
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