The XJO is expected to open flat this morning.
Yesterday we bounced from key support with a marginal day of gains – retaking some of the previous day’s over extension. The U.S overnight fell slightly, not reciprocating the rebound. Typically, our market would be more than willing, if not eager, to price in even slight pullbacks in the U.S. However, we have shown an extraordinary resilience of late, and a willingness to keep the pump going. If we use the 50 day MA as a measure, our market clearly rebounded from it yesterday, whilst their market shifted slightly underneath it.
U.S futures are also flat this morning, and it seems likely market remain quiet as we await their employment data tonight. Employment is one of the key macro-economic data releases that markets wants to see cool, but not cool too quickly, in order to both justify rate cuts and continue expected the coveted “soft landing”.
It feels like we are in a bit of limbo at the moment, broadly caught the middle of our ascending triangle or channel. Though both our market and the U.S remains expensive, and there is plenty of argument to justify further falls, it would be wise to recognise that bullishness has not suddenly vanished.
US Markets
US shares closed lower on average for the third straight session, with the DOW JONES and SP500 finishing lower, while the NASDAQ saw a modest gain. Shares traded back and forth ahead of tonight’s key event, the US JOBS REPORT. The report triggered selling back at the end of July as the data came in somewhat recessionary and investors are likely to hit sell tonight should the data come out worse than expected. Following this jobs report, US markets will be looking towards the rate cuts expected at the middle of September. For the past 25 years, rate cuts have heralded the end of the bullish movement, but that is usually because they coincide with recessions, whether that is the case this time or not will be hard to say.
Three of the eleven sector groups of the SP500 closed higher overnight, with Discretionary seeing the strongest gains, followed by Communications stocks. Healthcare stocks saw the most selling, followed by Industrials, Financials, and Materials.
Technically, the SP500 again held above the support at 5,500, which it has tested for the past few sessions. The index has now potentially set a double-top pattern, which could lead to further selling, but we would need to see a break below 5,500. Should the index rise from here, the recent peak at 5,650 would be the upside level to watch.
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