The XJO is expected to open mildly higher at roughly 8,630 at time of writing. This follows a continued rally in the U.S overnight. Their futures are flat.
Yesterday we opened higher, and for the early morning session extended those gains until we reached the both the downtrend line and a key level of resistance, both of which come in at roughly 8,650. We rebounded off these key lines intraday, finishing just below our open – but still strongly in the green.
The U.S extended their gains overnight for the 4th day in a row, but they too reach their downtrend line overnight, and it looks like they also rebounded from it intraday. It seems reasonable to suggest the U.S is likely running out of steam, and with an expected rate cut all but priced in, it is hard to suggest what their market has to look forward – a sentiment our market may be aware of.
Our own market also has little to look forward to. Yesterday our CPI numbers continued to chip away at any hope that we too will see a rate cut soon. Our market responded by dropping quickly but mildly.
Considering both our market and the U.S have rebounded off their downtrend lines intraday (and key levels of resistance), our CPI numbers were unfavourable, and that we have had several days in a row of a bullish move, it is not surprising to see our market’s lacklustre response to another strong night in the U.S. Indeed, don’t be surprised if once again most of the gains happen in the early morning session, and that we sell off to some degree by close – especially because we will likely retest the downtrend line and resistance level today, and likely won’t have the momentum to push through.
From here we should assume the resistance and downtrend line will hold and that our market will renew the selling. Of course, if the U.S continues to move higher from here, then our market seems likely to be able to at least hold ground, if not move higher.
US Markets
US shares rose again overnight, though the moves were a bit more moderate than the prior few sessions. US shares are rising because it is now looking very likely that the Federl Reserve will cut interest rates in December. This likely rate cut is acting like a carrot dangling in front of the market and helping to drag it higher. We are likely to see gains into this meeting as a result. However, after the rate cut comes, if it looks unlikely that more rate cuts will come, we could see some selling and profit taking. US economic data was again pretty mixed overnight but overall didn’t seem to have much affect on the market. Further minor data releases will come tonight but again they seem unlikely to trigger movement. Overall it does look like US shares will take a run at the all-time highs from here, though they will first have to clear a few key technical levels on the chart.
Nine of the eleven sector groups of the SP500 closed higher overnight, with Utilities, Materials, and Technology the best performers. Most sectors saw notable gains with only Communications seeing notable selling.
Technically, the SP500 has been rising for the past four sessions and has broken above the 50-day moving average and above the key resistance level around 6,750. With a break above these levels, we could now see the index will look like taking a run at the all-time high, although we do need to be aware of the potential for a lower peak to form here, given that the previous peak was below the all-time high. The overnight close could be such a peak as you could draw a downtrend line from the all-time high, touching the previous peak and finishing at the overnight peak. Given this is the case, we will need to watch closely to see if further gains are made tonight. The stochastic is also pointing higher but is starting to approach the overbought range.
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