The XJO is expected to open lower this morning near 8,950 at time of writing. This follows a strong night of selling in the U.S, which saw their market commit to the rebound off all-time high resistance, and sell down towards the bottom of their recent channel. Their futures are flat.
Yesterday we extended our opening gains through our session, practically reaching our all-time high resistance. However, late in the afternoon, we rebounded off of it, shedding roughly two thirds of our intraday gains by close. This was not surprising for a few reasons. Firstly, our market had already rallied aggressively from its recent lows, pushing over four per cent in only four sessions – we are due for some cooling and profit taking in the short-term. Secondly, the U.S was showing no signs of breaking their own all-time high resistance, so it makes sense we bounced from ours. Finally, we aren’t in an environment that can justify four days of unchecked gains. We just raised interest rates, and there is the expectation of further potential rises. Our dollar keeps moving higher against the greenback, and iron ore has had a big tumble – none of which has been reflected in our miners (which broadly speaking, are also overbought in the short to medium term).
Our red day today could complete an evening star reversal pattern, which is combined with the reversal yesterday, and the bullish day leading into it. The evening star is one of the more reliable reversal patterns when they occur at the end of a strong bull run (like we have just seen). However, there is support around here for our market, between 8,975 to 8,900. Beyond that, there is 8,850, 8,750, and 8,700. Furthermore, the U.S has CPI tonight, and with their market trading near the bottom of their channel, if the CPI comes in favourable (points to a rate cut), then their market could easily bounce and move higher once again. This would likely lead to our market stabilising, regardless of any reversal signals.
US Markets
US shares fell strongly overnight, with massive drops across the three major indices. Investors intensified their selloff of tech shares and fled transport stocks amid worries about artificial intelligence disruption. Wednesday’s stronger-than-expected jobs report has also fueled worries the Federal Reserve could now be less likely to cut rates. Attention will now turn to the inflation report, which will be released just before tonight’s session. Higher inflation is likely to intensify the selling, while lower inflation could trigger another run at the all-time high.
Four of the eleven sector groups of the SP500 closed higher overnight, with Utilities and Staples the best performers. Most sectors saw notable selling, with Technology, Energy, and Financials seeing the worst of the selling.
Technically, the SP500 once again held below the all-time high resistance at 7,000. With a hold of this level, and a bearish signal overnight, we would now expect a run to the recent trough at 6,800, which wasn’t far away from the overnight close. Its worth noting that the recent trough was no higher than the previous, which could indicate more of a sideways movement going forward. However, if the market breaks below 6,800, we could be in for a period of selling with lower peaks and troughs.