The XJO is expected to rally on open this morning despite a strong pullback in the U.S overnight. Their futures are trading higher, however.
Yesterday we opened on key support at roughly 8,880 – a level that also represented key resistance during our consolidation through September. We bounced from it intraday, retaking the opening losses, in a clear sign that we are willing to hold for now. However, by close, we had sold back off to sit roughly where we opened, testing 8,880 once again.
This morning we should bounce from it once more, with an expected open near 8,930. This is where the 50 day MA comes in, which is clearly acting as a point of comfort for our market in the short-term.
Whilst trading at the 50 day MA, our market is neither overbought nor oversold in the short-term by that metric. It is a point of equilibrium, where our market can digest the recent developments both locally and, in the U.S.
If we do continue lower from here, which is a very real possibility considering the strong CPI reading the other day, then 8,800 and 8,750 are the next clear targets. 8,750 roughly represents the lowest our market has traded at since the selling began at the start of September.
Of course, how the U.S trades will continue to inform our market’s movement. Though they were down last night, our market’s positive open is likely due to us already having had pulled back in good measure. If the U.S continues to selldown however, then our market will likely struggle to hold ground.
On the other hand, if the U.S consolidates or trades higher, our market will likely at least hold ground, and potentially crawl back some of the selling. Though considering a rate cut is less likely now, there is not much for our market to be positive about.
Looking at their chart, it seems reasonable to suggest they should sell down to roughly 6,750 – their previous all-time and now next logical support. If they do so and bounce, don’t be surprised to see how market track sidewards at the bottom of the range here.
US Markets
US shares closed lower overnight, with selling across all three major indices. US shares fell with the combination of the FED indicating that a December rate cut is not guaranteed, and also with the meeting between Trump and Chinese President Xi Jinping not finishing with a trade deal. Also denting sentiment was the performance of META (Facebook), which fell 11 percent after disappointing guidance. However, after US markets closed both Apple and Amazon reported better than expected earnings results, with the share prices of both strongly higher in aftermarket trading. This has sent US futures strongly higher. Amazon’s shares are currently sitting more than 12 percent higher in aftermarket trading. Don’t be surprised to see US markets close higher tonight after these results. However, if US markets don’t close higher, that would be quite a bearish signal and could indicate a strong pullback ahead.
Three of the eleven sector groups of the SP500 closed higher overnight, with Real Estate the best performers. Discretionary, Communications, Technology, and Materials saw the most selling.
Technically, the SP500 has been on an uptrend and potentially an acsending channel. The index seemingly reacted to the upperbound of the channel in the past few sessions, and has seen some selling from this level. The index did give a second-day-of-the-move bearish candlestick overnight and the stochastic is also crossing and turning lower from the overbought area. This indicates a technical signal for selling to the previous resistance level at 6,750. The recent peak also conincides with the round number of 6,900, which may now be resistance.