SG SESSION (Established a Lower Swing High, Trading Towards 2,800 Critical Support Zone)
The Straits Times Index (STI) ended the week with a loss of -0.8% (-23.38 points).
During the week, STI established a lower swing high (lower high) which is the first sign of a potential short term downtrend channel establishment (of the three factors to determine a trend reversal). The second sign is the violation of the highlighted lower bound uptrend channel which has been broken (though with low transacted volume which implies much lesser significance in this price action).
At the current junction, the 2,800 support level, established from prior swing low, will be a critical price level for the confirmation of this short term downtrend channel. Do note that this support zone also coincide with STI’s 200D Moving Average support, along with 20D MA Envelope (2 standard deviation) lower boundary line.
The levels to watch for the week are 2,800 critical support level, along with resistance at 2,900 level.
US SESSION (Lack of Action Despite Week of Positive Economic News)
The S&P500 endured another lacklustre week closing -0% (-0.18 points). The important economic news was positive. Despite the impending options expiration, the big story was the lack of action. There has not been a daily 1% move since early July. This is much lower than the normal August volatility.
At the current junction, S&P 500 is extending its display of Bearish Divergence in major oscillators such as MACD, RSI and Stochastic, against its absolute price movement over the past six weeks. This indicates a correction is imminent in the fore-coming trading sessions.
For further upside breakout, the Fibonacci projected level is at 2,208. The support to watch for this bullish leg is 2,145 level.
5 things to watch on the economic calendar this week (an extract and summary of investing.com)
1. Yellen speaks at Jackson Hole (Friday)
Investors are looking ahead to this week’s annual meeting of top central bankers and economists in Jackson Hole, Wyoming, due to take place from Thursday to Saturday.
The highlight will be when Fed Chair Yellen takes the stage on Friday. Speculation is rife that she will use the speech to start the race for a rate hike as soon as September following a recent barrage of hawkish Fed speakers.
The annual Fed symposium has sometimes been used by Fed chairs to make important policy pronouncements.
According to Investing.com’s Fed Rate Monitor Tool, investors are pricing in just a 12% chance of a rate hike by September. December odds were at around 46%.
2. Revised U.S. second quarter growth (Friday)
The data is expected to show that the economy expanded by 1.1% in the April-June period, downwardly revised from a preliminary estimate of 1.2%.
Besides the GDP report, the U.S. is to produce data on new home sales, existing home sales, durable goods orders, weekly jobless claims and revised consumer sentiment numbers.
3. U.K. Q2 GDP – second estimate (Friday)
The report is forecast to confirm the economy grew 0.6% in the three months ended June 30, unchanged from a preliminary reading.
However, the bigger question is about third quarter, post-Brexit, growth prospects.
4. Flash euro zone PMIs for August (Tuesday)
The euro zone is to publish preliminary data on manufacturing and service sector activity for August amid expectations for a modest decline.
5. July Japanese inflation data (Thursday)
Market analysts expect the headline figure to remain negative, falling 0.4% year-on-year, which would be the eighth straight month of declines.
The country has been struggling to hit its 2% consumer price target, maintaining pressure on policymakers to support the world’s third largest economy.