The XJO is expected to open practically flat this morning despite a break higher in the U.S overnight.
Yesterday we likely priced in their expected move which was heralded by their strong futures. We rallied back up to sit close to 8,750 resistance, which now roughly represents our all-time highs. Our muted open this morning is likely due to us pricing in their expected move yesterday, trading near resistance, and their flat to negative futures this morning.
The U.S is also going through an earnings season. Our market may be reluctant to run too hard, and instead be cautious as there may be shocks.
The technicals continue to hold up well. The break higher was to be expected, though the severity of the move was eyebrow raising. We continue to assume the market will track sidewards to higher. Be mindful that we could be seeing a higher trough being formed from Monday’s pullback, though we would need to see 8,750 break. If it does, a short-term uptrend may be forming.
US Markets
US shares broke higher overnight, with each of the three major indices seeing notable gains. US shares rose on the back of optimism around trade deals, with an agreement between Japan and the US that would see 15% tariffs on Japanese exports to the US. There are also reports that the EU and US are nearing a trade deal with 15 per cent tariffs as a key component. While markets are responding optimistically to these news items, they are actually rather negative. This is a strong lift in the tariffs that US consumers will be paying compared to previously, as the 10% baseline Trump tariff has barely been charged after delays and timing issues. After US markets close, Google and Tesla reported earnings results, with Google slightly higher after some positive numbers, and Tesla strongly lower after disappointing investors.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Healthcare, Industrials, and Energy the best performers. Utilities stocks saw the most selling.
Technically, the SP500 has now broken clearly beyond the previous all-time high resistance at 6,300. This indicates further upwards movement, though its hard to say where the move may head. The previous resistance at 6,300 is now likely to act as support.
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