SG SESSION (Trading within a Tight Range with Imminent Breakout Ahead)
The Straits Times Index (STI) went through a lacklustre week of +0% (+0.67 points) in last week’s session, trading within its tight range of 2,880 resistance and 2,830 window support zone.
As highlighted last week, STI remains resisted by its major resistance at 2,880 level accompanied with Bearish Divergence observed on MACD Histogram and RSI against its absolute price.
The levels to watch for the week are resisted level of 2,880 level due to the strong closing of US Friday’s session fuelled by its Non-Farm Employment Change data. The next resistance to watch for is at 2,911 level.
US SESSION (At Major Resistance with Bearish Signs)
The S&P500 rallied +1.3% (+26.95 points) during the previous week, primarily due to the strong employment report on Friday. (Non-farm payrolls recorded a stunning net gain of 287K, exactly the opposite of last month’s result of 11K after revisions.)
The two consecutive weeks of rally in S&P 500 is seeing it trading towards its all time high resistance level at 2,135, a whisper of a new closing record high. However do notice that over the past 3 months period with S&p 500 establishing consecutive higher highs, the MACD indicator and RSI are establishing lower highs displaying a Bearish Divergence signals. This is an indication of potential weakness in this existing rally.
The levels to watch for the week are 2,135 all time high resistance level, along with immediate support at 2,070 zone.
5 things to watch on the economic calendar this week (an extract and summary from (http://www.investing.com/news/economy-news/5-things-to-watch-on-the-economic-calendar-this-week-413426)
1. China second quarter GDP (Thursday)
The report is expected to show the world’s second largest economy grew 6.6% in the three months ended in June, slowing from growth of 6.7% in the preceding quarter, which was the slowest pace in a quarter of a century.
The Asian nation will also publish data on June industrial production, fixed asset investmentand retail sales along with the GDP report.
Additionally, China is to publish trade figures on Wednesday. The Asian nation publishedweaker than expected inflation data over the weekend, reinforcing views that more government stimulus steps will be needed to support the economy.
2. Bank of England rate decision (Thursday)
Expectations for more easing mounted after BoE Governor Mark Carney recently suggested interest rate cuts and additional stimulus will likely be needed over the summer to offset the hit to the economy from Britain’s decision to leave the European Union.
A Reuters survey published last week showed that 17 out of 52 economists polled predicted a cut to 0.25% from the current 0.5%, while another two said rates will be chopped to zero. The remaining two-thirds said the rate would be held steady at 0.5%, with policymakers more likely to wait until August to make any move.
Asked more broadly how the BoE was likely to respond to Brexit, a majority of economists who answered the question thought a combination of lower rates and more asset purchases was likely.
3. U.S. June retail sales report (Friday)
The consensus forecast is that the report will show retail sales inched up 0.1% last month, after rising 0.5% in May. Core sales are forecast to increase 0.4%, after gaining 0.4% a month earlier.
Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
4. U.S. inflation data for June (Friday)
Market analysts expect consumer prices to ease up 0.3%, while core inflation is forecast to increase 0.2%.
On a yearly base, core CPI is projected to climb 2.3%. Core prices are viewed by the Federal Reserve as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.
Rising inflation would be a catalyst to push the Fed toward raising interest rates.
5. U.S. second quarter earnings season kicks off (Friday)
Earnings next week are expected from big banks JPMorgan Chase (NYSE:JPM), Citigroup(NYSE:C) and Wells Fargo (NYSE:WFC) as well as other financial companies such as BlackRock Inc (NYSE:BLK) and PNC Financial Services (NYSE:PNC).
Earnings for the financial sector are expected to drop 5.4% in the second quarter. Financials have been the worst performing of the 10 major S&P sector groups this year, down nearly 6%, as they were hit by reduced expectations for a U.S. interest rate hike by the Federal Reserve and uncertainty in the wake of the vote by Britain to leave the European Union, or “Brexit.”
Other notable earnings expected next week include Alcoa (NYSE:AA), Yum! Brands (NYSE:YUM), Delta Air Lines (NYSE:DAL) and CSX Corp (NASDAQ:CSX).
Second quarter earnings overall are expected to decline 4.7%, the fourth straight quarter of negative earnings.