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Equity Market Talking Points:

  • Light calendar next week; S&P 500 at risk of further weakness
  • No major economic data events scheduled; DAX tries to hold onto support
  • ‘Brexit’ headlines in focus in absence of data events; FTSE may be in for big test

Longer-term fundamental and technical outlooks are now available in the DailyFX Q4 Equities Forecast.

S&P 500

On Friday, the U.S. jobs report showed 134k jobs were added to the economy in September, worse than the 185k analysts expected, but deserves an asterisks given weakness due to hurricane Florence. The unemployment rate was 3.7% compared to the estimate of 3.8%, the lowest since 1969. Average hourly earnings was 2.8% YoY compared to the prior month reading of 2.9%. Next week, ‘high’ impact events on the calendar arrive on Thursday via CPI figures for September and the preliminary U of M Sentiment survey for October. See the economic calendar for further details.

The S&P was hit hard in the back half of the week, taking it below trend-line support and putting it at risk of trading lower towards prior support around the 2872/60 region, or worse. The market could post a low prior given its overall trend, but risk is elevated that support breaks. The feeling is that risk/reward at the moment without good levels to lean on isn’t favorable for either side of the tape. That could quickly change.

S&P 500 Daily Chart

S&P 500, DAX & FTSE on Their Heels as New Week Set to Begin

DAX

Next week’s calendar doesn’t hold much in the way of high impact data events. The announced Italian budget is putting stress on the Eurozone and the euro, watch how this impacts equity markets in the region. For a list of all scheduled data, check out the economic calendar.

Last week, the DAX sunk down to support to end the week. The outlook lately hasn’t been particularly clear with levels on the top and bottom keeping price contained. However, if the DAX sustains trade below 12100 momentum could pick up towards the September low. Should the German benchmark reverse off support then there is still the potential for a bottoming pattern, but that will take some time to confirm. The market will start the week off in a generally precarious position.

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DAX Daily Chart

S&P 500, DAX & FTSE on Their Heels as New Week Set to Begin

FTSE

Looking ahead to the calendar, the theme of limited data events carries over to the U.K. where the only ‘high’ impact release is on Thursday with the release of the BoE Credit and Conditions & Bank Liabilities survey. Attention will remain on ‘Brexit’ headlines as per usual.

The FTSE is certainly not without its sellers and broadly speaking it is leaning as one of the more bearish of the major indices since topping back in May. It’s only a short distance lower before a test will occur of the September lows and February 2016 trend-line. It will be an important one if the market is to keep from falling apart. A breakdown below 7220 would likely spur a much larger decline, but support is support until broken.

FTSE Daily Chart

S&P 500, DAX & FTSE on Their Heels as New Week Set to Begin

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at@PaulRobinsonFX

Other Weekly Fundamental Forecast:

New Zealand Dollar Forecast - New Zealand Dollar Braces as Emerging Markets, Stocks Vulnerable

Japanese Yen Forecast – Bearish RSI Signal Emerges Ahead of U.S. CPI

British Pound Forecast – Sterling Building a Base on Brexit Hopes

US dollar Forecast – US Dollar May Extend Rally on CPI, Churning Market Sentiment

Gold Forecast - Gold Price Outlook Complicated by Rising Bond Yields and Equity Rout

Australian Dollar Forecast – Australian Dollar Beset By Low Interest Rates, Trade-War Worries