S&P 500 Challenges 3,200 Resistance, Hang Seng Tests 25,000 Support
S&P 500 INDEX, HANG SENG INDEX, CHINA A50 INDEX OUTLOOK:
- The S&P 500 index wobbles at 3,200 resistance on virus concerns
- Hang Seng index comes to a key support level at 25,000 after mainland markets’ collapse
- China A50 index consolidates at 15,000 – a two week low
S&P 500 Index Outlook:
US indices closed slightly lower on Thursday as sentiment was skewed to the cautious side. Utilities (+1.32%), materials (+0.36%) and communication services (+0.3%) were leading whereas information technology (-1.22%), real estate (-1.19%) and energy (-0.51%) were lagging.
Investors are evaluating the impact of growing virus cases in the US to the jobs market and economic recovery, against the backdrop of rising US-China tensions. More states are joining the mandate masks status following a record daily death toll in Florida.
Netflix’s earnings miss could put more pressure on the technology sector, which has been recently questioned for their high valuation and outperformance against the benchmark indices. This has left the Nasdaq index trading at a 47 price-to-earning (P/E) ratio, which makes it one of the most expensive major indices globally.
Source: Bloomberg, DailyFX
S&P 500 Index –Technical Analysis
The index has come to a strong resistance at 3,200 as it attempted a breakout. 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 Channel’ (chart below).
S&P 500 Index – Daily Chart
Hang Seng Index Outlook:
Hong Kong’s Hang Seng Index (HSI) stock market benchmark fell 2% on Thursday before climbing up a bit this morning. The index has fallen 6.6% from the recent high at 26,970 seen on July 7th. US sanctions over Hong Kong’s special status and Chinese officials weighed on market sentiment. In addition, a plunge in mainland A-share markets, which fell over 4%, also dragged the Hong Kong market lower.
Tencent (-5.52%), Geely Auto (-11.98%) and HKEX (-5,72) were among the largest contributors to Hang Seng’s fall yesterday. In the near term, mainland companies are likely to remain the biggest influencers on Hang Seng.
Technically, the Hang Seng Index is looking for support at 25,000, which is the upper ceiling of the ‘Ascending Triangle’ that it broke out two weeks back. The previous resistance has now become a support. Breaking down below 25,000 will probably lead to more downside towards the 50-Day Simple Moving Average at 24,550.
Hang Seng Index – Daily Chart
FTSE China A50 Index Outlook:
The FTSE China A50 Index(A50) stock market benchmark suffered its largest single day drop since March 16th, falling 4.3% as the IPO of SMIC (stock code 688981) drained liquidity in mainland stock markets. Even a better-than-expected 2Q GDP figure failed to lift sentiment.
Technically, the A50 index could perhaps find support at 15,100 - its 20-Day Simple Moving Average (SMA). The next support could be found at 14,500 – a 38.2% Fibonacci retracement.
FTSE China A50 Index – Daily Chart
--- 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.