The XJO is expected to edge lower on open this morning following a firm pullback in the U.S overnight as their market rebounded from all-time high resistance. Their futures have also moved into the red.
Our meek response is likely due to our market once again leading the U.S, with our market having already sold down yesterday after rebounding from our own all-time high resistance. Our expected open is roughly 9,000 at time of writing – a level that is both key support and the lows that we bounced from intraday yesterday. This morning we will test it again, and it seems likely we hold it today, unless U.S futures drive harder in the red through our session.
Our pullback yesterday and our relatively soft open this morning has our market returned to the median of the short-term Bollinger bands which represents a mean reversion of volatility. The Stochastic also remain at normative levels. This means our market is in a good position to continue the rally from here if the trend decides to hold.
Not much has changed the past few sessions. The U.S was meant to release CPI data last night (delayed from last week). It’s unclear why the market thought they were going to get the data, considering the government remains closed. For now, no data is likely a good thing as it means they can continue to expect a rate cut and not be challenged in any key data points. Of course, uncertainty has settled into both in the U.S and our market, and seems to be building. The question is whether the uncertainty is strong enough to override the market’s insatiable hunger for further rate cuts. In recent history, it has not.
For now, we should expect 9,000 to hold. If we do see continued selling, then 8,880 is the next clear key support and also roughly where the 50 day MA comes in.
US Markets
US shares closed lower overnight, with selling across the three major indices. Overnight sentiment was dampened by a weak earnings report from Netflix (which fell 10%) and by reports that Trump was planning export curbs on wide array of goods ranging from laptops to jet engines. In general, US shares have really stalled out for the past fortnight. Given that and the fact that US economic data has not been reported during the shutdown, the stalling shouldnt be unexpected. Despite the economic data black out, the Labor Department will make an exception by releasing its September CPI (inflation) numbers. This will provide the FED with a glimpse at the state of inflation and an insight into whether Trump’s tariffs are affecting consumer prices. It is likely the next directional move in US markets is based on that event.
Four of the eleven sector groups of the SP500 closed higher overnight, with Energy the best performer, followed by Staples and Healthcare. Industrials, Discretionary, Communications, and Technology stocks saw the most selling.
Technically, the SP500 has bounced down from the all-time high resistance overnight, which sits at roughly 6,750. The index remains on an overall uptrend, but that level would have to break for further gains to look likely. With the currently bullish momentum, a break higher is certainly possible. To the downside, the recently lows around 6,550 are now likely to act as support. Overall the index remains in an uptrend, with higher peaks and troughs – the index just set a new higher trough so we will need to look to see if a new higher peak (above 6,750) eventuates from here.
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