The XJO is expected to edge lower this morning with an expected open near 8,570 at time of writing. The U.S committed to a break lower overnight, falling through their recent consolidation range and closing marginally outside the short-term Bollinger bands. Our market is being resilient in the face of their selling this morning, but don’t be surprised if our courage fades throughout the day.
It is not too surprising to see a muted response from our market. Our market in comparison to the U.S had a decent selldown a couple of days ago, and we are nowhere near our all-time highs. The U.S is coming off a much higher base, and it’s reasonable to suggest we have already seen our fair share selling despite their market holding up well. Furthermore, U.S futures have edged into the green this morning, giving some indication that the selling isn’t panic driven. All in all, though our market will continue to be pushed and pulled by the U.S, unless volatility spikes hard, it would be reasonable to expect our moves to be more muted.
We continue to hold key support around 8,550 to 8,575. This level represents the bottom of the recent consolidation range. Indeed, we bounced off it intraday yesterday and will likely test it again this morning. It wouldn’t be surprising to see us fall through today, especially in anticipation of the U.S CPI tonight. The 200 day MA comes in at roughly 8,550 too, and will likely act as a point of comfort in the short-term. So even though we may see some further selling today than what our futures are pointing to right now, it seems likely we settle somewhere around here. Of course, beyond that we have support at 8,450 and 8,400 which roughly represent the bottom of our market.
US Markets
US shares closed lower overnight, with selling across all three major indices. Tech and growth stocks led the selling, dragging the NASDAQ and SP500 down strongly, while the selling in the DOW JONES was more mild. US shares have continued to grind lower after the FED rate cut, with the positive news now out of the way, and with share prices at all-time highs, many investors are seemingly looking to take profits here. The selling comes ahead of some major data tonight, specifically the November inflation report, which could rule out or open the door for further interest rate cuts, so we could see movement after this event. Without this event however, it does look like US markets would see some more profit taking in the short-term, so it will need to be a positive reading to turn things around.
Four of the eleven sector groups of the SP500 closed higher overnight, with Energy seeing the strongest buying. Information Technology, Communication Services, Industrials, and Consumer Discretionary all saw strong selling.
Technically, the SP500 has stalled out at the all-time high peak around 6,900 and has now shown some bearish signals, including a break below the 50-day moving average and a break below potential support at 6,750 overnight. This could indicate a fall to the next key support level around 6,550. The index remains on an overall uptrend but after a recent inline peak and trough, there is a real potential for a change in trend here. This would occur if the index breaks below 6,550. Should the index resume rising, we would need to see a break above 6,900 for further gains to look likely.
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