The XJO is expected to open lower this morning following a decent pullback in the U.S overnight and their negative futures this morning.
Markets were looking tired, so it is not too surprising to our market open lower. The U.S also completed an evening star reversal pattern, which is typically a reliable reversal pattern that would spell further selling to come. Furthermore, their pullback was a clear rebound from their 200 day MA.
Our market was very reluctant to price in their recent bull run. Where the U.S rallied back to their 200 day MA, pushing five per cent off their lows, our market was only able to translate that into a three per cent rally. We typically hope this means our market would also be less sensitive to their downside moces. However, our market has been trading in fashion we have not seen for over a year, since before the bull run started – which is to barely share in U.S gains, but be more than happy to price in their losses.
Our expected open is near 7,950 – a point of contention for our market in the recent move up. We should expect this level to break today, with U.S futures in the red and their bearish signal. 7,900, 7,850, and 7,800 are all soft supports on the way back down to our lows. Expect 7,900 to hold today.
Taking a step back, it seems likely that markets track in a broad sidewards range. We may very well see the lows again, but the news cycle remains unpredictable, and could easily keep markets from making new highs or lows.
US Markets
US shares closed firmly lower overnight, with selling across the three major indices, but concentrated in technology and growth stocks. This meant that the NASDAQ saw the most weakness. Selling came after more commentary on Trump’s trade policies, with the White House announcing fresh automotive tariffs, ahead of the reciprocal tariffs next week. Other economic data was mixed overnight, though the market seemed unaffected. Tonight we will see a revision to 4Q24 US GDP, which is again unlikely to affect the market, but tomorrow night will see the release of US inflation data, which is likely to trigger directional movement. For the time being though, tariffs remain the talking point for investors and any news of fresh tariffs is likely to be met with strong selling, as it was overnight.
Five of the eleven sector groups of the SP500 closed higher overnight, with Staples the best performers, followed by Utilities stocks. Technology, Communication, and Discretionary stocks saw the most selling.
Technically, the SP500 stalled at the resistance level at 5,775, which is where the 200-day moving average sits and has now fallen from this level, showing an evening star pattern (bearish). This indicates further selling, with a possible downside target at the recent lows around 5,550, which may act as support.
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