SG SESSION (Supported at 2,800 Critical Level, Establishing Double Bottom Formation)
The Straits Times Index (STI) ended the week with a gain of +0.5% (+13.63 points), rebounding from the support zone at 2,800 level.
The rebound of STI during the week has negated the gradient of its upper downtrend line, relieving substantial pressure of its downward pressure. At the moment, STI is a valid Double Bottom formation (second retracement within the formation with significant reduced volume) awaiting for a breakout at 2,900 resistance level. This observation is also accompanied with potential MACD bullish crossover, along with centerline cross.
At the current junction, it is likely to see further downside pressure during monday opening of STI due to friday’s bearish closing of S&P500 during the focus on Fed conclave at Jackson Hole. The critical support level to watch for the week is 2,825.
US SESSION (S&P500 Sitting on Support with Significant Bearish Divergence)
The S&P500 ended the week closing -0.7% (-14.83 points). The decrease in Average True Range (ATR) of S&P 500 reflects the low volatility environment we are currently in. There has not been a daily 1% move since early July, which 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 seven weeks. This indicates a correction is imminent in the fore-coming trading sessions.
As S&P 500 is currently sitting at August support of 2,165 level, it is likely to see a breakdown towards 2,110 resistance turned support level.
5 things to watch on the economic calendar this week (an extract and summary of investing.com)
1. U.S. jobs report for August (Friday)
The consensus forecast is that the data will show jobs growth of 180,000, following an increase of 255,000 in July, the unemployment rate is forecast to dip 0.1% to 4.8%, whileaverage hourly earnings are expected to rise 0.2% after gaining 0.3% a month earlier.
An upbeat employment report will point to an improving economy and support the case for higher interest rates in the coming months, while a weak report would add to uncertainty over the economic outlook and push prospects of tighter monetary policy further off the table.
Besides the employment report, the U.S. is to produce data on personal spending andincome, core PCE prices, consumer confidence, pending home sales, and factory orders in the week ahead. There is also ISM data on manufacturing sector activity.
2. Chinese manufacturing data (Thursday)
The official China’s manufacturing purchasing managers’ index is forecast to remain unchanged at 49.9 this month, while the Caixin survey is expected to slip to 50.2 from 50.6 in the preceding month.
Anything above 50.0 signals expansion, while readings below 50.0 indicate industry contraction.
3. U.K. August PMI’s (Thursday)
The manufacturing PMI is forecast to inch up to 49.0 from 48.2 a month earlier, whileconstruction activity is expected to improve slightly to 46.1 from 45.9.
The Bank of England cut interest rates to a record-low 0.25% and launched fresh easing measures earlier in August in a bid to buffer the economy from a downturn following the Brexit vote.
Economic activity in the U.K. is expected to slow down sharply in the second half of the year as businesses face uncertainty over the country’s future direction in wake of the U.K.’s vote to exit the European Union.
4. Euro zone flash August inflation figures (Wednesday)
The consensus forecast is that the report will show consumer prices inched up 0.3%, compared to a rise of 0.2% in July, while core prices are expected to gain 0.9%, unchanged from the prior month.
Slow growth and virtually non-existent inflation will force the European Central Bank to extend and expand the scope of its asset purchase program at its policy meeting later this month, according to a recent Reuters poll of economists.
5. Canadian growth data (Wednesday)
The data is expected to show that the economy expanded 0.5% in June, after shrinking 0.6% a month earlier.