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The XJO is expected to open lower this morning following a pullback in the U.S overnight. Their futures have also edged into the red.
We should open near 7,650, breaking through support near 7,700. This would also break the uptrend line we have traded on since the rally began back in October.
7,600 is the next key support, which is also where the 50 day MA comes in. This is a good target for the short term if the selling persists.
With the whippy nature of the market however, we could easily be back above the trend line on Monday, which would make today’s open a false break. Breaks against the underlying trend are not necessarily met with continued movement, and can be instead a simple weakening of the trend.
It’s worth noting the U.S settled on support and remains elevated. If they rebound, which would be in step with how that have been trading lately, our market is likely to move back towards 7,700 than 7,600.
Essentially, we are seeing cracks forming in the bull run, but we shouldn’t assume our move lower this morning is the begging of an extended pullback or correction. It seems more likely at this stage that we will continue to track sidewards to higher.
US Markets
US shares closed lower overnight, with each of the three major indices finishing in the red. US shares saw moderate selling after a greater than expected rise in producer prices in February added to inflationary concerns, this comes after US consumer price data earlier this week also came in stronger than expected. US retail sales overnight also bounced back from a low in January, though the growth in sales was slower than expected. This pricing data calls into question whether inflation really is continuing to fall, and calls into question whether we will see US rate cuts in the first half of 2024. The US Federal Reserve will meet next week, and though they are very unlikely to change rates at that meeting, investors will be looking for clues as to whether the rate cut timetable has been pushed out.
Only two sector groups of the SP500 closed higher overnight, with Energy and Communications stocks finishing in the green. Real Estate stocks saw the most selling, followed by Utilities and Staples stocks.
Technically, the SP500 held below the all-time high resistance at roughly 5,170 index points. However, it also held above its longer-term uptrend line that has formed since the end of October 2023. This leaves the index in an ascending triangle pattern and we will need to see whether it breaks to the downside or upside. Should it break to the downside, we would expect a move back to 5,000 – 5,050. Should it break higher, it would be trading in fresh all-time highs.
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