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S&P 500 Retraces at Key Resistance, Hang Seng Faces a Pullback

S&P 500 Retraces at Key Resistance, Hang Seng Faces a Pullback

Margaret Yang, CFA, Strategist

S&P 500, HANG SENG INDEX, GOLD PRICE OUTLOOK:

  • S&P 500 index futures hit key 3,200 resistance, correcting after
  • Hang Seng index is set to follow lower, trading at 25,700 pre-market
  • Gold prices pull back to US$ 1,800, overall trend remains bullish

S&P 500 Index Outlook:

US markets retraced sharply on Monday, with technology shares facing profit-taking ahead of the Q2 earnings season. Global Covid-19 infections topped 13 million. US cases surged 1.86%, or 61k in a single day. California shut indoor dining and bars after reporting a record number of hospitalized coronavirus patients.

Anxiety is building surrounding the US stock market, which is trading near record highs, in face of a severe recession and a second viral wave. Traders are probably hesitant to take more risk this week until earnings results paint a brighter outlook.

Sector-wise, only 4 out of the 11 S&P 500 segments closed mildly higher, while 7 were sharply lower. Information technology (-2.12%), communication services (-1.96%), consumer discretionary (-1.73%) and real estate (-1.63%) were among the worst performers while defensive healthcare (+0.53%), industrials (+0.42%) and financials (+0.32%) were showing resilience.

Q2 earning results are kicking off this week, which could bring the market to a ‘reality check’ that is long overdue. All 11 sectors are seeing their earnings to decline in Q2, with energy (-149.9%), consumer discretionary (-118.9%), industrials (-88.9%) and financials (-55.2%) among the hardest hit, according to a report from FactSet. Big banks - JP Morgan, Citi and Wells Fargo – will release their results on Tuesday.

Singapore’s 2Q GDP figures disappointed markets. The city-state’s growth declined by 12.6% year-on-year, and 41.2% quarter-on-quarter as the coronavirus pandemic hit the service sector roughly. The introducing of ‘Circuit Breaker’ measures helped to contain the virus spread at the expense of temporary economic pain. This could have some negative impact on local stock markets this week.

S&P 500 Retraces at Key Resistance, Hang Seng Faces a Pullback

Source: Bloomberg, DailyFX

S&P 500 Index –Technical Analysis

The index has hit strong resistance at 3,200 and failed to break it last night. A ‘Bearish Engulfing’ candlestick pattern suggests there could be more consolidation in the days to come. An immediate support level can be found at 3,118 – the 20-Day Simple Moving Average (SMA). However, the overall trend remains bullish within the context of an ‘Ascending Triangle’ (chart below).

S&P 500 Index – Daily Chart

S&P 500 Retraces at Key Resistance, Hang Seng Faces a Pullback

Hang Seng Index Outlook:

Hong Kong’s Hang Seng Index (HSI) stock market benchmark might be facing a pullback in the face of US headwinds. The index has consolidated since last week as the coronavirus situation in the city has escalated quickly. The Hong Kong chief executive has announced to shut all indoor dining from 6pm to 5am the next morning, and to close all schools. This could bring a second wave impact to the real economy.

Technically, the Hang Seng Index is consolidating at around 25,700, with immediate support and resistance levels found at 25,000 and 26,00 respectively.

Hang Seng IndexDaily Chart

S&P 500 Retraces at Key Resistance, Hang Seng Faces a Pullback

Gold Price Outlook:

Technically, gold prices have broken above an 'Ascending Triangle' formed since the end of March, moving higher since. Its overall trend remains bullish as the 10-Day, 20-Day and 50-Day Simple Moving Averages (SMAs) formed golden crosses, sloping upwards.

Breaking out above US$ 1,750 resistance has opened the room for more upside towards next resistance at US$ 1,800 and then US$ 1,872 (161.8% Fibonacci extension).

Gold Price Daily Chart

S&P 500 Retraces at Key Resistance, Hang Seng Faces a Pullback
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--- Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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