Yesterday the XJO blew through the 6,950 resistance, finally playing some catch-up to US markets which pushed further into Blue skies earlier in the week. We saw the 6,950-level tested again as support in the futures market overnight. If this level holds technically the XJO looks bullish back to 7,200.
Overnight the US markets managed to close in the green with the Nasdaq leading the way higher. This means that Tech stocks led the way.
Jerome Powell called the recovery from the pandemic “uneven” on Thursday, signaling a more robust recovery is needed. “We want to see a string of months like the March jobs report to see progress,” he said, citing uneven data between the strong recovery in employment last month but high jobless claims that were released earlier Thursday.
All in all, markets have everything they could want- Fiscal Stimulus from the US, extremely accommodative central banks, and the reinsurance that rates will stay low for a long time. It is a fine balancing act though, Between Vaccines and Covid Cases, as well as stimulus vs the fears of inflation. We want to see the economy rebound, but even the slight hint of raising rates will cause a fear selling event.
Markets will continue to monitor progress with President Biden’s 2 trillion-dollar infrastructure plan. The Devil will be in the detail on how they will fund it. The increasing corporate tax, and/or Janet Yellen’s global minimum corporate tax rate.
The XJO is expected to edge lower on open this morning. We have had a strong run the past five trading days, so a breather is to be expected despite the U.S moving into fresh highs again overnight. U.S futures have ticked into the green, and if they remain so during our session today, don’t be surprised if we follow suit.
It’s a risk on environment, and fears of interest rate lifts approaching isn’t enough to shake things just yet. The type of rally we are seeing isn’t sustainable in the longer term so expect a pullback or sideward movement soon.
With the XJO breaking the post pandemic high, the next clear target is the 7200 level – our market’s all-time high. Before we get there though, we may use 6950 as a support first to re-evaluate and recuperate.
US shares drifted higher overnight, with another all-time high close for the flagship S&P 500 index. Just one day after the Fed’s meeting minutes highlighted that there was no appetite for raising rates in the face of expected future inflation, Fed Chair Jerome Powell stated overnight that the bank would in fact react if inflation expectations started moving “moving persistently and materially” higher; what a difference a day makes.
US economic data was somewhat negative overnight, with more jobless claims than expected, but this is a forward looking market, and with expectations high, the release did little to dent the current bullish slant. Technology stocks were the strongest performers overnight, while Oil & Gas and Telecoms stocks were the weakest performers, most other sectors closed fairly flat.
- Nasdaq pulls back, with selling in Tech, Discretionary, and Communication Services - May 5, 2021
- Markets continue to consolidate at top of the range - May 4, 2021
- US markets break higher again but with low momentum - April 30, 2021