The XJO is expected to edge higher on open this morning despite the U.S closing marginally in the red overnight. Our positive open is likely due to the U.S showing strength after a spat of selling from their stronger than expected CPI reading last night, where their market managed to retake intraday losses into the close. Their positive futures this morning further shows the U.S has either shrugged off the reading, or perhaps quickly changed its mind to view it as a positive. Regardless, it is giving our market the ability to continue pushing into fresh highs this morning as we look forward to our very first interest rate cut next week.
Yesterday we retested key all-time high resistance at roughly 8,500, managing to stick our head above it and hold ground into the close. Our market is only expected to edge higher, but perhaps if U.S futures remain positive during our session today, perhaps we will commit to the break. This would also mean the ascending triangle we have been trading in is also breaking.
If new highs are on the agenda, then 8,550 and 8,600 seem the most logical targets. Our market seems to like 50 point increments. It is still fair to say though, that our market won’t feel confident to make leaps and bounds without the U.S also moving higher. If we don’t see gains across the waters soon, then it seems likely that our market struggles at these levels. Furthermore, we are in a good position to fall and take profit, so any selling in the U.S will likely be easily translated into our market too.
US Markets
US shares closed moderately lower overnight, with prices falling after stronger US inflation for January. US CPI (inflation) grew by more than expected, calling further rate cuts into question. US shares initially traded firmly lower but bought back up throughout the session to finish only modestly lower. Inflation was very strong in January and was a fair jump from December. However, the market seems content to hold the view that it is unlikely to rebound to enough of a level as to trigger interest rate rises. The resilience of US markets continues to be unbelievable, shaking off plenty of negative news across the past few weeks. While this resilience looks set to continue, it can’t continue forever.
Technically, the SP500 has seemingly stalled out just below its all-time high resistance level which sits just above 6,100. We will need to wait and see if this level holds or breaks. To the downside, there is key support at roughly 6,000 points, which is also close to where the uptrend line comes in. This leaves the SP500 inside an ascending triangle, waiting for a directional breakout.
Only two of the eleven sector groups of the SP500 closed higher overnight, with neither rising to a notable degree. Energy stocks saw the most selling, followed by Real Estate stocks.
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