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Equity Talking Points:

  • A few nuggets of data, Trade War headlines; S&P 500 holding on, watch NDX
  • ECB on Thursday; DAX on the verge of a big technical test
  • BoE on Thursday; FTSE rolling over hard, any bounce to be temporary

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S&P 500

On Friday, the U.S. jobs report for August was released. Non-farm payrolls came in at 201k vs. the 195k expected, with the prior month revised to 147k from 157k. The unemployment rate was 3.9%, up from 3.8% the month prior. Average hourly earnings came in stronger than expected at 2.9% vs. 2.7%, helping give the dollar a boost while hitting index future pre-market. Looking to data next week, we have CPI on Thursday followed by Retails Sales and UofM Confidence on Friday. Trade war headlines will remain a persistent threat…

Turning to the technical front, the S&P is not far off its highs, but as we discussed on Friday, if the Nasdaq 100 cracks the underside of the rising wedge building since early this year the whole market could be in trouble. Other global markets are certainly pointing to the possibility of a tough stretch ahead with the DAX and FTSE trading at multi-month lows and the Nikkei acting very sluggish. Seasonality from now into October is decidedly negative for stocks. However, until we see the S&P start trading lower with momentum and breaking levels we’ll need to reserve an overly bearish outlook and respect support at its feet.

S&P 500: Daily

S&P 500, DAX & FTSE Outlook: ECB, BoE, Markets Diverging

DAX

Next week brings with it the ECB on Thursday, and while it may not have an impact on the market (perhaps more so the euro), traders should of course be on their toes. Outside of the ECB, there aren’t any other scheduled releases which are expected to move the market.

The DAX breaking down below 12104 last week has the index in the verge of testing the neckline of a broad head-and-shoulders topping pattern dating back to June of last year. The neckline resides down near 11600. A test of the neckline will be critical for long-term prospects, as a break could usher in a much larger decline. The path of least resistance is lower as long as the market stays below 12104.

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DAX: Daily

S&P 500, DAX & FTSE Outlook: ECB, BoE, Markets Diverging

FTSE

On Thursday, the BoE meets and is expected to maintain its current monetary policy. Looking at the calendar, data is light next week, but that doesn’t mean the FTSE won’t be moving.

Along with the DAX, the FTSE has been a real weak spot across major global equity markets. On Friday, the decline worsened with the footsie taking out another support level around 7300. The broad ‘RST’ topping pattern we discussed not long ago is in full swing. We may see an oversold bounce soon, but the path of least resistance is set to remain lower for the foreseeable future, with the March low targeted at some point in the weeks ahead.

FTSE: Daily

S&P 500, DAX & FTSE Outlook: ECB, BoE, Markets Diverging

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

Other Fundamental Forecast:

New Zealand Dollar Forecast - NZD/USD Prices May Fall on Swedish Election and as ECB Sinks Euro

Japanese Yen Forecast - The Japanese Yen Moves into the Tariff Conversation

Oil Forecast – Trade Wars and an Emerging Market Crisis Likely To Keep Oil Volatile

British Pound Forecast – Positive Momentum Will Continue to Drive Sterling Higher

Gold Forecast - Gold Prices Vulnerable to Sticky U.S Core CPI, Retail Sales

Australian Dollar Forecast – Australian Dollar Still Short Of Buy Signals Despite Strong Data

Chinese Yuan Forecast - Yuan Awaits China's Retaliation on US Tariffs, PBOC's Guidance

Canadian Dollar Forecast - Loonie Awaits NAFTA Outcome for Direction