The XJO is expected to rally this morning with an expected open near 8,630 at time of writing. This follows a recovery in the U.S overnight. However, they tested the recent consolidation support, now as resistance, and failed. They ended up rebounding from it and giving up about half the day’s gains, indicating at this stage they remain indecisive. Their futures are mildly in the red.
Our market has seen some resilience and courage over the past couple of sessions. We managed to hold ground yesterday and even rally into the close to finish marginally in the green. This is despite the strong selldown in the U.S the night before. Our courage may be due to us already trading at a discount compared to the U.S, and that we had already priced in their fall on Tuesday. Regardless, it seems strength may be returning. This is also somewhat evident this morning, with our market happy to rally on a sketchy looking rise overnight.
Our open of roughly 8,630 will have us test key resistance that represents the top of the recent consolidation range. Don’t be surprised if most of the rally therefore occurs on open. It doesn’t seem likely our market has enough courage to push through (today at least), and instead seems more likely to rebound off it intraday. Indeed, it would even be hard to expect our market to hold opening gains, especially with U.S futures dipping into the red.
U.S CPI came in lower than expected overnight, though the numbers are somewhat suspicious and the first release since the shutdown ended. Regardless, when coupled with the poorer than expected data earlier in the week, it wouldn’t be surprising to see the U.S continue higher from here. Their futures aren’t indicating that this morning, so unease remains. But if the idea of a rate cut starts making its way in their market’s mind, they will likely have a Santa Rally. Of course, we would likely follow.
US Markets
US shares closed higher overnight after lower than expected inflation numbers. The numbers open the door for further rate cuts as long as future data permits. However, despite a strong intra-session rise early in trading, US markets did see some selling into the close to finish the session around opening levels. Still, the data opens the door for another possible rate cut at the January FED meeting – though there’s more data to come before the January meeting. US markets are pricing in around two more rate cuts in 2026, though if that stretches to three, we could see further upside for US shares – as long as the economy doesn’t list towards recession. Tonight we will see further PCE price data, which could confirm the likelihood of the January rate cut (though a reduction in likelihood is also possible).
Six of the eleven sector groups of the SP500 closed higher overnight, with Consumer Discretionary, Communication Services, and Information Technology the best performers. Energy stocks saw the most selling.
Technically, the SP500 recently stalled out at the 6,900 all-time high resistance and pulled back. The index did break below the first potential support level and the 50-day moving average, which should have indicated a technical move back to 6,550. However, with the overnight lower than expected inflation, the market has jumped back above the 50-day moving average and potential support. Still, the index didn’t show a bullish candlestick, and instead showed an indecisive doji. We will likely need to wait to see how tonight shapes up before a directional move will look likely. The stochastic is turning and crossing towards the bottom of the range, which does indicate we could see a rebound.
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