The XJO is expected to edge higher on open this morning. U.S futures are practically flat.
Our market is set to make fresh all-time highs this week. Perhaps the weak data last week has entrenched the belief of another rate cut in July – an idea that was previously thought unlikely considering the two cuts we have seen in quick succession.
Markets have also turned a blind eye to the unrest in the U.S. However, if the conflict spreads to other major cities, then it would be reasonable to expect the market to feel uneasy.
Our intraday all-time high is near 8,680, and our all-time high close is closer to 8,600. Considering our expected open is near 8,550 this morning, it looks like our market is determined to get there. It is fair to say that we are contending with all-time high resistance levels, so we could see our market stall here first before pushing through.
Keep in mind, that when our market makes fresh all-time highs, it often pulls back either immediately, or within a handful of days of consolidation. It very rarely continues to make fresh highs. We shouldn’t really expect anything different this time around, especially considering the current environment.
We continue to trade in ascending channel, and until we see the uptrend line break, we should expect it to continue. The uptrend line comes in around 8,450 at this stage, so we have room for some consolidation, mean reversion, and a healthy session or two of profit taking. 8,450 is also a key support, having been local and historic resistance in the past too.
Looking further ahead however, there is not much to look forward too. If we weren’t right in the middle of a rate cut cycle, it seems reasonable to suggest our market would be trading much lower. The world’s largest economy is at war both domestically, and internationally. Though trade tensions have eased, it seems clear that Trump still wants to push the U.S towards trade isolationism. We should also keep in mind that though markets are pumping largely on rate cuts, those cuts are coming for a reason. Economies are slowing. Confidence is falling. We have not seen labour markets slow down much yet, but historically, economies tend to be already knee-deep in recession before the numbers even show it.
US Markets
US shares closed firmly higher on Friday and managed to edge out a small gain overnight. US shares rose on Friday with jobs data for May coming in better than expected. Unemployment was flat at 4.2% and more jobs were created than expected, although April’s jobs numbers were revised lower. The data showed that the jobs market is holding up fairly well at the moment, despite the uncertainty of Trump’s tariffs, and that reassured investors. The next big data test will come on Wednesday night, with US inflation data for May, which is expected to show inflation starting to rise again, with the tariffs working to push prices higher. Lower than expected inflation could trigger a push to the all-time high, while a stronger inflation number will likely trigger selling. There is also some civil unrest in the US at the moment, which may be starting to worry investors. Protests in California have triggered a dispute between Trump and Californian Governor Newsome, with California threatening to not send collected Federal Taxes and Trump threatening to cut spending programs for the state. Trump is also feuding with his backer Elon Musk, which has triggered selling in Tesla.
Five of the eleven sector groups of the SP500 closed higher overnight, with Discretionary the best performer, followed by materials stocks. Utilities and Financials saw the most selling.
Technically, the SP500 pushed through two resistance levels at roughly 5,975 and 6,000. With these levels breaking, from a technical perspective, further gains to look likely. The next major level to the upside is the all-time high at roughly 6,120. Should the index break its uptrend line, that is where we could see more selling.
Want to continue reading?
This is only an excerpt from todays TradersCircle Members Morning Market Update and doesn’t include the key data and charts our traders are keeping an eye on every day. Become a member today for this plus full length mid-day and end of day updates, trade recommendations, trade group webcasts, and much more!