The XJO is expected to edge higher on open this morning near 8,900 at time of writing. This follows a small pullback in the U.S overnight, which saw their market clearly rebound off their all-time high resistance intraday.
Yesterday we were unable to hold our gains, pulling back to finish practically flat. After a strong bounce form our lows, it wasn’t too surprising to see us profit take. It also seems like we rebounded from the recent resistance intraday yesterday, at roughly 8,925. Our recent ping-ponging has been quite volatile, and yesterday was the first sign we may be starting to cool.
Even though yesterday looks like it rebounded from resistance intraday, it may be that we are seeing another lower peak form. Today’s muted open provides little insight. Ultimately, we are trading in a pennant, formed by our medium-term uptrend, and our short-term downtrend – even if you can’t draw lines that are satisfactory.
It is therefore hard to suggest which way this market will trend. We should assume that it will follow the underlying uptrend, but with the U.S flirting with all-time highs, and our market whipsawing with little indication on direction, it is hard to have any conviction.
We have CBA’s report this morning. The banks tend to move in unison to varying degrees, and they are some of our biggest companies. If CBA’s report moves our banks, then we should see that move our market (provided the Miners and other sectors don’t act against them).
US Markets
US shares were mostly lower overnight, with dips in the SP500 and NASDAQ, while the DOW JONES dged up to its third record close in a row. Investors were cautious after some disappointing retail sales figures overnight. Tonight US markets will react to a key unemployment and jobs data report. US retail sales unexpectedly stalled in December as households scaled back spending on vehicles and other big-ticket items, suggesting a slower growth path for consumer spending. This did however increase the odds for a rate cut from the Federal Reserve, with the probability of an April rate cut up to 36.9% from 32.2% on Monday.
Five of the eleven sector groups of the SP500 closed higher overnight, with Utilities, Real Estate, and Materials stocks the best performers. Healthcare and Communications stocks saw the most selling.
Technically, the SP500 is currently in the process of testing the the all-time high resistance at 7,000. Its worth noting that the recent trough was no higher than the previous, which could indicate more of a sideways movement going forward, though we will have to wait and see. Should 7,000 break, we are likely to see more directional gains.
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