The XJO is expected to edge higher this morning with an expected open near 8,710 at time of writing.
The U.S was up strongly again overnight, and they are now once again within arm’s reach of their all-time high resistance. It seems Santa is visiting this year, albeit perhaps only for a quick stop-over.
Our market yesterday was happy to price in gains from the U.S’s Friday session. We likely believed that their rally was likely to continue for them until they at least reached all-time high resistance. We rallied back to the highs of the false break from last Monday at roughly 8,700 and stalled. We should flirt with this resistance again on open this morning. We may feel comfortable pushing through today, especially if U.S futures show they still have gas in the tank. Otherwise, don’t be surprised if our market’s cynicism returns, and feels reluctant making further headway without the U.S breaking higher first.
There is also plenty of resistance around here, including the 50 day MA which comes in just below 8,750 resistance. Even if our rally does extend, it seems likely that is the next stopping point as it represents an equilibrium for our market in the short-term. In essence, when trading at the 50 day MA, the market is being bought/sold for at the same average price it has been for the past three months. It is therefore not trading at a discount, or at a premium by that metric, and often acts as a point of comfort whilst we weigh things up. 8,750 was also a major support for our market before we broke below it in November, and we should expect it to act as resistance going forward.
US Markets
US shares continued higher overnight, with each of the three major indices seeing gains. US shares are continuing to grind back towards their all-time highs after the lower than expected inflation reading. This opens the door for further Fed rate cuts in early 2026. The SP 500 closed within 50 points of the record high it set earlier this year. While this is a pretty quiet period for US economic data, we will see the release of US GDP growth tomorrow – its hard to see this having too much of an effect on things however. Instead, we would assume that this current gradual grind sideways to higher will continue into early January.
Ten of the eleven sector groups of the SP500 closed higher overnight, with Materials the best performers, followed by Financials and Industrials. Most sectors saw reasonable gains with only Consumer Staples closing lower on average.
Technically, the SP500 has recently set a higher trough and is rising off potential support around 6,750, which is also roughly where the 50-day moving average sits. On Friday, we saw a bullish candlestick and the stochastic is also turning to cross an point higher. This indicates a technical gain to the all-time high resistance at 6,900, which is now not too far away. While the index still looks technically bullish, expect fairly slow movements from here.
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