The XJO is expected to edge lower this morning following a pullback in the U.S Friday night. Their futures have also moved firmly into the red.
We pulled back on Friday, rebounding from all-time high key resistance once again. We were guided lower by negative U.S futures during our session, which ended up playing out mildly Friday night. We should open near 8,560, but if U.S futures continue remain firmly red, then we could see a repeat of Friday and see further selling.
The dominant pattern for our market remains the channel. All-time resistance that forms the top of the channel comes in at roughly 8,625. The bottom of the channel is less defined but is somewhere around 8,450 to 8,550. Part of the reason it is less defined is because our market seems to be making slightly higher troughs. This represents the clear underlying bullish pressure our market has felt whilst the U.S made consecutive fresh all-time highs. The higher troughs forcing our market against the bulwark resistance of our all-time high resistance translates to our market trading in a shallow ascending triangle. This is the more immediate pattern that our market is focusing on.
It is hard to suggest which way the market will break. For now, we should assume we will continue to trade sidewards to bullish until we see otherwise. Trouble may come from existential risks surrounding tariffs and monetary policy, but they have been looming in the shadows since Trump was elected, and markets are trading at all-time highs…
In the week ahead, the big news is U.S CPI tomorrow night. CPI is expected to increase across the board, which sounds like it should be bearish for their market. However, if it remains in an acceptable range, their market may rationalise it as representing stability in the economy.
The U.S also has PPI data on Wednesday night, and we have local unemployment figures on Thursday. We are expected to remain at 4.1%, which is practically full employment. On Thursday night the U.S has retail sales figures which are expected to rebound.
US Markets
US shares closed lower on Friday, with each of the three major indices finishing moderately lower. US investors were weary after Trump threatened a 35 per cent levy on Canadian goods and is eyeing blanket tariffs of 15 per cent to 20 per cent on most trading partners, up from the current global baseline minimum level of 10 per cent. Additionally, over the weekend he threatened an increase on tariffs on the European Union to 30%. With markets pushing back higher, it seems Trump feels he can get away with more tariffs and this could be negative for markets. US futures are currently sitting lower after the Trump tariff threats from the weekend. Tuesday night we will see the release of US CPI (inflation) data, and this will have big consequences for the next directional move for markets.
Only two of the eleven sector groups of the SP500 closed higher on Friday, which were Energy, and Discretionary shares. Every other sector closed lower, with Materials, Healthcare, and Financials seeing the most selling.
Technically, the SP500 recently found some resistance around 6,300 and it has held below this level for the past week. 6,300 would have to break for further gains to look likely. The previous resistance at 6,150 which may now act as support.
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