The XJO is expected to open practically flat this morning. The U.S made marginal gains into fresh all-time highs overnight but looks like it is running out of steam. Furthermore, they reached the top of their broader ascending channel, and their futures are flat.
With the local CPI reading today, the Fed meeting tonight, and the U.S looking overbought in the short-term and running out of steam, it is no surprise to see our market consolidating for the moment. Yesterday, CSL tanking was the biggest contributor to our index’s selldown. Otherwise, there isn’t much action.
For now, we are trading near the top of the range, bouncing between all-time high resistance at roughly 9,100, and key support near 9,000 to 9,050 (our previous all-time high resistance).
Don’t be surprised if there is some volatility following both today’s CPI reading and the Fed meeting tonight in the U.S. They could in fact counter balance each other. If the CPI reading comes in lower than expected and entrenches a belief in our market of expedited rate cuts, we should finish today firmly in the green. However, if Powell is not dovish enough tonight, considering how overbought the U.S looks, they could easily see some profit taking. These scenarios can also be in reverse, or both could be positive and lead to great highs, or both could be negative and lead to swift selling.
For now, we continue to assume the bullish trends in both our market and the U.S hold – albeit with caution. Though we may not see explosive movement, we should continue to assume that we will eventually see all-time highs. Our market has a penchant for tracking sidewards, and so the move higher could be slow and steady with doses of consolidation and a few spikes in volatility.
US Markets
US shares closed higher again overnight, continuing with the bullish momentum after Friday’s break higher gains. US markets jumped on Friday, with US inflation coming in slightly lower than expected, opening the door for a rate cut from the Federal Reserve at their meeting tonight. While an October cut had largely been expected by the market, bets on another cut in December are now starting to rapidly increase. Whether those bets continue or not will depend on tonight’s meeting, should the FED signal further cuts, we are likely to see US markets take another leg higher. Should the FED signal a wait and see approach, we could see some profit taking. Technology stocks were the best performers overnight after OpenAI announced a restructure that will see Microsoft own more of the company. Outside of technology, most of the rest of the market saw selling – which could be a sign that the move is running out of steam.
Three of the eleven sector groups of the SP500 closed higher overnight, with only Technology seeing notable gains. Real Estate, Energy, and Utilities saw the most selling.
Technically, the SP500 broke through the previous all-time high resistance on Friday, which sits at roughly 6,750. The index has continued higher since then and overnight tested the 6,900 level, which it was unable to break. The index remains on an uptrend, and may also be on an asending channel, which it hit the upper-bound of last night. This could indicate the index is about to stall-out here, those this will depend on the nature of tonight’s FED meeting. To the downside, the most recent trough around 6,650 is likely to act as support. The stochastic may also be starting to turn here, which could indicate some consolidation.
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