Wall Street bucked its usual trend of pre-Thanksgiving gains, with major indices posting losses instead of their typical holiday rally. This unexpected downturn, driven by weak earnings reports and strong inflation data, raises concerns for ASX 200 bulls, especially as the index hovers near record highs.

Wall Street’s Unusual Performance

Historically, the day before Thanksgiving sees positive returns for the S&P 500 and other indices, but this year’s performance deviated significantly. The Nasdaq 100 led the declines, recording its worst session in eight days. The S&P 500 futures also formed a bearish two-day reversal pattern just below its all-time high, while the Dow Jones posted a minor bearish engulfing pattern at its peak. This bearish momentum could signal further pullbacks.

Inflation data added to the cautious sentiment. The super core PCE index rose 0.4% in October, marking its fastest monthly increase in eight months and exceeding its long-term average. Personal consumption also surged by 0.6%, its highest pace in nine months. These figures suggest the possibility of a second wave of inflation, fueled by improving consumer sentiment post-election.

ASX 200 Outlook

The ASX 200 faces challenges in maintaining its recent momentum, especially with weak cues from Wall Street. Despite attempting to approach the 8,500 level, the index has struggled to break through, and technical indicators suggest caution. A bearish divergence on the daily RSI hints at waning upward momentum, and the slight overnight rally may prove to be a trap for optimistic investors.

On shorter timeframes, a bearish divergence has also emerged on the 1-hour chart. The index is currently trading within a bullish channel, but this movement appears corrective. This setup points to a potential short-term rally before a likely breakdown. Key levels to watch include the weekly pivot point at 8,389, with further support at the weekly VPOC at 8,348 and weekly S1 near 8,300 if sentiment turns bearish.

Economic Events to Watch

Upcoming economic data and events could further influence market sentiment:

• NZ Business Confidence (08:45 AEDT)
• AU Capital Expenditure (11:30 AEDT)
• RBA Governor Bullock Speech (19:55 AEDT)
• EU and German CPI Data (00:00 AEDT)
• Canadian Average Weekly Earnings (00:30 AEDT)

Investors will closely monitor these developments for signs of economic strength or weakness that could sway the ASX 200’s trajectory.

Technical Analysis Summary

The ASX 200’s failure to conquer the 8,500 resistance, combined with bearish technical signals, suggests caution for bulls. A breakdown below the bullish channel could open the door to further declines, with targets around 8,389 and potentially below 8,300 if sentiment deteriorates further. The interplay between inflation fears, Wall Street trends, and upcoming data will be critical in shaping the index’s path in the coming sessions.