The XJO is expected to rally on open this morning following a small rally in the U.S overnight. Their futures have edged into the red.
Despite our market crashing up against all-time high resistance, like waves on a rocky shoreline, the undercurrent remains firmly bullish. Yesterday we pulled back only marginally, barely pricing in the negative U.S futures during our session. The U.S overnight ended up reversing intraday losses to finish marginally in the green, and in doing so, is giving our market permission to rally this morning.
The broader pattern is the channel we have been trading in since making all-time highs mid-June. However, with the underlying bullish tension, our market has been creating higher troughs. Coupled with our market’s reluctance to break through all-time high resistance, we are being forced to the point of an ascending triangle.
This morning, we should retest all-time high resistance, with an expected open near 8,620. We may peek through intraday, but at this stage we should expect it to hold. It seems reasonable to suggest that we will likely want to see the U.S break into fresh highs first.
The big news this week comes in the form of an important CPI reading tonight from the U.S. It is hard to suggest how their market will react, but we shouldn’t underestimate American optimism in the face of reality and adversity. Our market today may be priming for a break tomorrow, with the expectation of the U.S breaking tonight.
US Markets
US shares closed higher overnight, despite initially opening lower. Shares opened lower after Trump threats over the weekend that he would increase tariffs against just about everyone. However, the market no longer really believes Trump will do anything, and if he does, they believe he will cave fairly quickly. This was somewhat evidenced overnight after Trump signalled he’s willing to negotiate on tariffs with the European Union, easing some of the concerns stoked by the issuing of tariff letters over the weekend. The major event for this week will occur tonight however, with US CPI (inflation) for June. This will be very important in determining whether prices are rising with tariffs, and whether the Fed will be able to cut rates any time soon. Expect the market to move on this report.
Seven of the eleven sector groups of the SP500 closed higher overnight, with Communications and Financials the best performers. Energy and Materials stocks saw the most selling.
Technically, the SP500 recently found some resistance around 6,300 and it has held below this level for the past week. 6,300 would have to break for further gains to look likely. The previous resistance at 6,150 which may now act as support.
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