The XJO is expected to edge higher on open this morning following an explosive rally in the U.S overnight. Their futures are flat.
Yesterday we rallied quite strongly, moving back to key resistance at roughly 8,200. U.S futures during our session heralded their strong move overnight, which we started to price in. We gave up some of the intraday gains into the close, but this morning we are expected to open near yesterday’s highs. With the strength we saw overnight, don’t be surprised to see an extended move higher with 8,250 the next clear target.
The U.S is clearly happy to get the election results out of the way, and not having to worry about a long drawn-out process with claims of election fraud or worries about insurrections. They broke into fresh all-time highs, and if their momentum keeps going, we should follow suit. However, there is a Fed meeting tomorrow morning, which could either upset or bolster the current hype. Either way, the next few days could easily spell further volatility, and our market is likely to continue to follow their movements.
Overall, we should still assume bullish to sidewards. Yesterday we tried to break the short-term downtrend line but couldn’t commit. This morning, we will have another go – but with U.S reaction overnight it is hard not to expect the underlying uptrend to continue.
US Markets
US shares exploded higher overnight after the election of Donald Trump as the next US President. Its clear that markets are happy with the outcome, possibly because they now don’t need to orry about insurrections and claims of election fraud and also because the uncertainty of the decision has now been resolved. In the past, Trump has also measured his success by the performance of the stock market, making it clear that his policy will support share prices. This includes cutting taxes for US businesses and taxing foreign competitors more. His proposed policies are expected to increase US government deficits (beyond already record levels), which could trigger additional inflation; as a result, bond yields have continued to rise and Real Estate stocks (which are rate sensitive) saw selling overnight. Tonight will also see the Federal Reserve interest rate decision, with the FED expected to conduct another 0.25% cut. However, its worth noting that they are also likely to signal a slower pace of cuts from here.
Eight of the eleven sector groups of the SP500 closed higher overnight, with Financials, Industrials, Discretionary, Energy, Technology, and Communications stocks all rallying strongly. Real Estat and Staples stocks saw a fair degree of selling.
Overnight the SP500 jumped to a fresh all-time high, breaking through the previous peak at 5,870 and continuing higher. It is an unbelievable move for a market at extremely expensive levels and at the top of the range. Its hard to say what will happen from here, as things are mostly moving on fundamentals, but things technically look further bullish.
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