The XJO is expected to edge lower on open this morning. The U.S had a strong fall, but it was largely driven by tech and consumer disc. – sectors that aren’t represented well in our index. U.S futures are flat.
Yesterday we retested key resistance at 8,300. We gave up some gains, but ultimately settled on the key 50 day MA. With the pullback overnight in the U.S, we should open near 8,270, or near the lows of yesterday. It wouldn’t be surprising to see a move back to 8,250 today. This would once again normalise our Bollinger bands and short-term stochastic as we wait and see how the U.S trades.
The U.S is trading in an almost picture-perfect pennant pattern. They clearly rebounded from their countertrend, and are now testing both support and the uptrend line. They are also straddling their 50 day MA, which largely paints an indecisive picture. Our market will likely be reluctant to make too much headway one way or another without the U.S breaking first.
Fed minutes will be released tonight. This could cause further tantrums from the U.S, which would likely break they pennant lower. It could however do the opposite and help them bounce back. Regardless, we are likely to follow whatever they do, albeit with less gusto as their reactions to news around inflation seem to be tech driven.
US Markets
The U.S was down last night. Tech and Consumer Disc. shed their gains made over the past few days, falling over 2%. Data showed that the services sector expanded for a sixth consecutive month in December with PMI coming in stronger than expected. This reignited old embers around inflation and the future of monetary policy. Unease from the last Fed meeting which caused the recent pullback from the start of December was likely pulled back to the forefront of the market’s mind.
The SP500 is clearly trading in a pennant pattern. On Monday night, it rebounded intraday from both key resistance and the short-term countertrend line which comes in at roughly 6,000. The negative news last night continued that rebound, dropping the index back towards key support and the broader underlying uptrend line that comes in at roughly 5,870.
Ultimately, the SP500 continues to track sideward in a broad pennant pattern, hugging the comfort of the 50 day MA. However, the pullback last night, driven by the typical worries, might be enough to cause a break lower. It is hard to know, but the pennant must break eventually. Tonight, the minutes from the last Fed meeting will be released. This could compound the markets recent tantrum, but could otherwise help dampen recent Powell’s hawkish message and initiate a bounce.
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