The XJO is expected to edge lower on open this morning following a meek pullback in the U.S overnight.
Yesterday we continued the bounce from both key support and the uptrend line. The key support was previously our all-time high resistance at 8,450 and the top of the ascending triangle. The new resistance is now 8,500, which we pretty much made it to yesterday. We rebounded from it intraday to give up over half the days gains. This means we are once again trading in an ascending triangle, albeit a sketchy looking one, as we contend with 8,500, but continue to be pushed higher by the uptrend line.
It does look like we are running out of steam though. We expect a pullback soon. Tonight, the U.S is expecting key employment figures, which may be the catalyst they need to profit take and mean revert. Otherwise, our market may simply track sideward and consolidate before continuing higher. Either way, it would be surprising to see our uptrend line hold for much longer.
US Markets
US shares stalled overnight, with selling across each of the major indices. There wasn’t any major economic data overnight, though a report did show a greater than expected rise in US jobless claims, which does suggest the economy is continuing to moderate. The next major event for US markets will come on Friday night, with the November unemployment report. For now, US shares continue to be extremely bullish with huge government spending and expected rate cuts. However, they look to be in a somewhat vulnerable position, with inflation remaining sticky and with other economic data weakening. While US markets do want a little further weakening in data (to ensure rate cuts), they don’t want data to deteriorate so much that it points to recession.
Five of the eleven sector groups of the SP500 closed higher overnight, with Discretionary the strongest performer. Materials, Healthcare, and Industrials stocks saw the most selling. Most other sectors were fairly flat.
Techically, the SP500 pushed through the 6,000 point resistance level on Friday, indicating further upwards movement. The overnight stall in US markets isn’t a strong enough bearish bar to suggest a pullback just yet. Its hard to say where this move may end, but on a pullback, the previous resistance at 6,000 points is likely to act as support.
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