DOW JONES, HANG SENG INDEX OUTLOOK:
- Dow Jones futures edged lower on virus concerns, fading stimulus hopes
- China’s Party plenum kicks off this week, with an eye on Xi’s ‘internal circulation’ strategy
- Hang Seng Index (HSI) may see short-term pullback, but overall trend remains bullish
Dow Jones Index Outlook:
Dow Jones, S&P 500 and Nasdaq 100 futures fell more than half a percent at the Monday open, sending a ‘risk off’ signal to Asia-Pacific equities. A rapid climb in the number of coronavirus cases across the US and more restrictive counter-virus measures implemented across the EU may dampen growth prospects. Meanwhile, hopes for a pre-election US relief package remained thin. Asia-Pacific equities may trade lower amid a relatively quiet economic calendar today.
The US has registered 85,085 and 78,702 new coronavirus cases on October 23rd and 24th respectively, hitting new records. The number of daily new Covid-19 cases have already surpassed the peak seen in mid-July, painting a worrying picture of a fragile economic recovery.
On the macro-side, this week’s key market events include:
- October 26th (Monday):
Chinese Communist Party Plenum
US New Home Sales (MoM)
- October 27th (Tuesday):
China Industrial Profits (YoY)
US Durable Goods Order, CB Consumer Confidence
- October 28th (Wednesday):
Australia Inflation Rate
Bank of Canada Interest Rate decision
- October 29th (Thursday):
Bank of Japan Interest Rate decision
Germany unemployment rate, inflation rate
US advanced Q3 GDP growth rate, weekly jobless claims
ECB interest rate decision and press conference
- October 30th (Friday):
Germany flash Q3 GDP growth rate
Spain flash Q3 GDP growth rate
EU core inflation, Q3 GDP growth rate
US core PCE Price Index, University of Michigan consumer sentiment
Technically, the Dow Jones index entered a consolidative period in mid-October and its near-term trend appears to be bearish-biased (chart below). An immediate support level can be found at 28,040 – the 38.2% Fibonacci retracement. 28,040 also happens to be where its 50-Day Simple Moving Average (SMA) line lies. An immediate resistance level can be found at 28,390 – the 23.6% Fibonacci retracement. Breaking above 28,390 may open room for more upside towards the next resistance level at 28,960 – the previous high.
The MACD indicator formed a “Death Cross” last week and prices have been trending lower since. This suggests that bearish momentum is dominating for now. The width of the Bollinger Band indicator has narrowed in recent days, signaling more consolidation ahead.
Dow Jones Index – Daily Chart
Hang Seng Index Outlook:
The Chinese Communist Party Plenum will be held in Beijing this week to set economic goals for the next five years. President Xi’s ‘internal circulation’ strategy, which aims to re-balance growth towards domestic demand, may be a key focus at this meeting. Consumer, technology, renewable energy, financial sectors are among the top areas to watch on.
Chinese fintech giant Ant Financial will be dual-listed in Shanghai and Hong Kong in the weeks to come. With a potential price between US$ 35-45 billion, Ant may become world’s largest IPO ever. It also marks the first time that a major IPO is priced outside of New York.
Technically, the Hang Seng Index (HSI) has broken above its 100-Day SMA line and also has surpassed September’s high of 24,900. The overall trend appears to be bullish-biased, as the 20-Day has crossed above the 50-Day SMA recently (chart below), forming a “Golden Cross”. An immediate resistance level can be found at 25,065 – the 61.8% Fibonacci extension level, while an immediate support can be found at 24,855 – the 50% Fibonacci extension.
Hang Seng Index – Daily Chart
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter