The XJO is expected to open flat this morning following a similar finish from the U.S overnight which saw their market retake marginal intraday losses into the close. U.S futures are also flat.
Yesterday we gave up much of our intraday day gains but still finished in the green. The past couple of sessions have been almost trench warfare between the bulls and the bears. Yesterday’s session indicates that the bulls aren’t as firmly in control as perhaps what Monday would have suggested. There perhaps is some sense to our market after all.
Markets are tracking sideward. Our market clearly still wants permission from the U.S to continue the pump, but the U.S seems less confident in itself and its data. Things have paused for now as we await U.S CPI tonight.
CPI is expected to continue to decline, which their market may not like? – it is hard to tell. On one hand, lower CPI means more rate cuts, but on the other, it also means being closer to a recession. Their pump has been built on a “soft landing”, however it is unclear how strong they want to see their data and exactly what is the goldilocks range. As we head towards rate cuts and potential recessions, the balance becomes quite delicate and harder to be one minded about.
The range for the moment seems to be between roughly 8,100 and 7,900. 8,100 is the our key level of resistance that represents our all-time higher, which we have failed at at least three times during its life. 7,900 is key support which is also roughly where the 50 day MA comes in. We should expect these levels to hold for now, but of course the CPI reading could upset that.
US Markets
US shares closed mostly higher overnight, with the SP500 and NASDAQ closing in the green, while the DOW JONES closed in the red. Prices initially traded firmly lower, but they rebounded throughout the session to close slightly higher. Markets are seemingly nervous ahead of tonight’s CPI data. Strength in technology stocks helped to offset weakness in banks and energy stocks. There was a lack of major news and events for the US market overnight, but that will change tonight with the release of US CPI for August. Investors will be hoping that the reading will be low enough to clear the way for rate cuts to begin at the FED meeting next week, but also that the CPI isn’t too weak as to suggest a recession.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Real Estate, Technology, and Discretionary the strongest performers. Financial and Energy stocks saw notable selling.
Technically, the SP500 has bounced off some support at 5,400. However, the market was unable to close above 5,500, which was previously a support level and which may now be acting as resistance. Should we see a move above 5,500, that would likely indicate a rebound. Should we see a break below 5,400, further selling would look likely. A reaction to tonight’ CPI reading is likely to trigger the next directional break.
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