The XJO is expected to open higher this morning following a strong rally in the U.S overnight. Their futures are flat.
On Tuesday we finished fairly flat, after rebounding intraday from the broader underlying downtrend. Yesterday saw the continuation of that rebound with decent move lower. However, this morning we are set to reverse both yesterday’s and Tuesday’s intraday losses with an expected open just shy of 7,900. If we hold strength, our market will peep its head above the downtrend line, flirting with the idea of breaking it.
It’s important to remember however, that even if the downtrend line breaks, the most dominant trend for our market at present is still a downtrend. Therefore, we should assume that we are seeing the downtrend potentially shallow out, rather than our market changing to an upward to sidewards trend.
It wouldn’t be surprising to see our market start tracking sideward down at the bottom of the range here in the immediate term. Markets seemed to have made tentative peace with Trump’s isolationism, and Powell suggested overnight that tariff induced inflation is transitory. It doesn’t seem enough to bring back the pump, but it should mean new lows will be harder to make.
7,750 remains clear support and the bottom of our market for now, and 7,925 is a tentative resistance which seems likely we retest this morning.
US Markets
US shares jumped overnight, with a rise across each of the three major indices. US shares gained with the US Fed meeting, as Jerome Powell stated he was comfortable with the level of inflation, and that he still expects around 0.50% of interest rate cuts by the end of the year. However, policy makers also acknowledged the possibility of lower growth and higher inflation due to Trump’s tariffs. Powell was very relaxed about the risks for the market overnight, and this is quite a bullish signal for US shares. Investors will remember 2022 however, where Powell was completely wrong on inflation and markets tanked as a result. Still, after this meeting, in the absence of new market news, don’t be surprised to see prices rise in the short-term.
All eleven sector groups of the SP500 closed higher overnight, with Discretionary, Energy, and Technology shares seeing the most buying. Real Estate and Healthcare saw the least buying.
Technically, the SP500 has broken below and has now fallen to the level of a technical correction (10% fall from the peak), which comes in around 5,540. Over the past few sessions it has bounced back towards the downtrend line, which it has held for the past few sessions; this would indicate a move back to 5,540. Should the index fall below 5,540, it would suggest continuing lower to the next downside level, which would be previous support at 5,420. Should the market continue to rebound from here and break above the downtrend line, the previous support at 5,800 – 5,850 is likely to act as resistance.
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