The XJO is expected to open lower this morning near 8,780 at time of writing. This follows strong selling in the U.S overnight, which saw their market commit to the break lower and move to the next key support and recently lows. Their futures are flat.
Yesterday we gave up some of our unusual gains from the previous sessions, finishing firmly in the red. Our open this morning will have us extended those losses, and we should go on to test key support at roughly 8,750 to 8,775 once again. This level is also potentially the neckline for a head and shoulders pattern that has been forming for the past few weeks. However, it won’t be confirmed until the support is broken. For now, it seems the market is tracking sideward in a broad range, with the underlying uptrend potentially still in play.
With a rise in interest rates, and the RBA potentially set for another round, it isn’t surprising to see our market willing to price in losses from the U.S. We should expect the selling to continue if the U.S cannot hold ground.
US Markets
US shares fell strongly overnight, with strong selling across the three major indices. The FANG index, which tracks the US megacap techs, was 2.4 percent lower, taking its five-session loss to 7 percent. Amazon, which reported results after the closing bell, lost 4.2 percent. Microsoft slumped 5 percent. Overall investors are starting to worry that trillions of dollars invested into AI and related areas isn’t translating to improved earnings or compounding economic growth.
Only two of the eleven sector groups of the SP500 closed higher overnight with small gains in Staples and Utilities. Every other sector saw strong selling, with Materials, Discretionary, and Technology the worst performers.
Technically, the SP500 broke the short-term uptrend line and immediately pulled back to the next key support overnight, which sits at roughly 6,800. This is a breakout of the ascending triangle and could indicate further downwards movement, though we would need to see 6,800 break. The next level after that is close by at 6,750. However, a break of 6,750 could indicate a move to 6,550. Should the market rebound here, its hard to see it rising through the all-time high resistance at 7,000.