The XJO is expected to open flat this morning despite a pullback in the U.S overnight. Their futures are mildly green.
Yesterday we gave up all our opening gains by the afternoon session, to then finish slightly in red. We rebounded off 8,450 resistance intraday, to finish just on 8,400 support. It seems this morning we will have a mild open where we are happy to hold that support for now.
With the U.S pulling back overnight, and our market not willing to commit, it’s becoming clearer that markets aren’t sure what to do. There seems to be little conviction as we approach our all-time highs. Perhaps we are realising how silly it is that we are only trading a percent or two away.
Yesterday, our weighted mean CPI came in slightly stronger than expected. This translates to the RBA having less of a reason to cut rates, which likely contributed to the intraday pullback.
Regardless, the market continues to trade in a short-term ascending channel. It has a fairly shallow gradient that expresses the slow trudge higher we have seen over the past month. We should expect it to continue for now, but remain cautious as markets are clearly looking for the next move. With markets trading near their all-time highs, a bearish one seems more likely that fresh all-time highs.
US Markets
US shares closed lower overnight, with prices initially trading slightly higher before falling to close at a reasonable loss. A bit of a pall has fallen over US markets across the past week due to a continued rise in US government bond yields, with investors starting to realise that US government debt may soon be out of control. This is on top of worries around the tariffs and Trump in general. Adding to the debt worries is the recently passed Republican spending bill, which gives massive tax cuts to the wealthy and which will increase the US government deficit substantially further. While the rising bond yields have been a worry, plenty of retail investors and traders continue to buy, which is helping to push markets higher. This momentum will likely hold until a piece of negative news triggers major selling. After US markets closed NVIDIA reported a slight beat on earnings expectations, which has sent the share price and futures markets higher this morning. However, it should be worth noting that the beat is only slight, which historically has not always been enough to send the share price higher.
After US markets closed a Federal Court ruled that President Trump doesn’t have the authority under economic emergency legislation to impose sweeping global tariffs. This has sent US and global futures very strongly higher.
All eleven sector groups of the SP500 closed lower overnight, with Utilities, Materials, and Energy seeing the most selling.
Technically, the SP500 fell back to the key 5,800 level on Friday night, which it held at the close. This is also roughly the level of the uptrend line that has formed for the past two months. With Tuesday’s bounce from these levels, we should see further upside from here. The first target would be last week’s peak at 5,970, with the 6,000 level the target should that break. A break above 6,000 would indicate a move back to the all-time highs.
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