The XJO is expected to edge higher on open this morning. The U.S had an indecisive night, finishing practically flat. Their futures are also being non-comital.
Yesterday we opened near 8,050, breaking through key resistance at 8,000 and the 50 day MA. By close however, we retraced over half the opening gains to finish back on the 8,000 resistance.
It would be fair to suggest that our market is running out of steam. Immediate term stochastics have our market severely overbought and starting to cross over. Our market has also skirted the top of the Bollinger bands recently. Both indicators would suggest that our market is likely due for a pullback soon, but don’t indicate when. Keep in mind, markets can remain overbought for quite some time, but it is curious to see such strength in our market in this economic environment.
Our market sentiment remains positive enough that no bad news from the U.S is translating to a sustained move higher. The U.S was flat overnight, for example, and our market will still try and push through 8,000 on open this morning. It is clearly a struggle though as our expected open is relatively meek compared to yesterday’s open – again, buying fatigue seems to be setting in.
At this stage is seems more likely that we continue to hang around 8,000 (or dare it be suggested we have a pullback) than continue to push through. U.S futures are flat this morning and should translate to a quiet day.
If we do however push through, then 8,150 is the next key level. It is both a key historic level of resistance and support, and roughly where the 200 and 100 day MAs come it – marking it a point of equilibrium for our market for the long and medium terms respectively.
There is also an underlying uptrend line in play that we have been grinding along for the past week or so. This would have us moving higher, but it still seems more likely that it breaks soon and by the very least shallows out. The gradient seems too steep to be sustained especially with a tired looking market and key levels being tested.
US Markets
US shares finished flat overnight after a back-and-forth session. Investors remain in an optimistic frame of mind with Trump signalling that he backing down from his trade war (seemingly with nothing gained). Trump is practically begging China for a deal at this point, but many tariffs remain in place and so far China has been unwilling to make a deal. This will likely make investors nervous again soon, unless a deal is made. With current tariff settings, as we are likely to see a strong economic downturn from the US. Markets will likely have further upside if Trump can secure a deal with China, otherwise a resumption of selling seems likely.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Utilities, Real Estate, and Energy the best performers. Technology shares were the worst performers.
Technically, the SP500 closed higher for the fifth straight session overnight, with the index now breaking the downtrend line that has formed since February. This should indicate a move back to the peak of late March around 5,775, which is also where the 200-day moving average sits.
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