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S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

Margaret Yang, CFA, Strategist

S&P 500, HANG SENG, STRAITS TIMES INDEX OUTLOOK:

  • S&P 500 index plunged 2.37%, likely breaking the 23.8% Fibonacci retracement level at 3,250
  • Hang Seng Index (HSI) opens 1% lower, forming a potential “AB=CD” pattern
  • Straits Times Index (STI) likely breaks a key support at 2,500 and drifts lower

S&P 500 Index Outlook:

The S&P 500 index had a bloodbath day as multiple headwinds put traders on a defensive mode. Several Fed members warned a lengthy economic recoverywithout signaling further easing measures. Concerns remained on coronavirus resurgence in parts of the EU. Besides, President Trump said that the White House could veto final Food and Drug Administration (FDA) rules for issuing an emergency-use authorization for a coronavirus vaccine, according to Bloomberg News. Coronavirus-linked headlines undermined a better-than-expected US Markit Manufacturing PMI reading, which came at 53.5.

Rising demand for safety boosted the US Dollar, which climbed for a third day to 94.43 – the highest level seen in two months. A surging US Dollar dampened precious metal prices, and put pressure on risk-linked currencies namely AUD, NZD and NOK.

Asia-Pacific indices may follow their Wall Street peers lower amid a relatively quiet calendar day. Japan’s Nikkei 225 index opened down by 0.6%, and Australia’s ASX 200 index 0.35% lower. Read more on our economic calendar website.

IG Client Sentiment showed that retail traders are leaning towards the shorting S&P 500 index, with 56% of positions net short, while 44% are net long. As markets fell, traders added marginallong positions (+2%) overnight. Compared to a week ago, traders maintained short bets unchanged while increasing long (+6%) positions.

S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

Source: DailyFX

All eleven S&P 500 sectors ended deeply in the red, with energy (-4.55%), information technology (-3.21%), materials (-2.93%) and real estate (-2.91%) among the worst performers. A whopping 94.7% of the S&P 500 components closed lower.

S&P 500 Index Sector performance 23-9-2020

S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

Source: Bloomberg, DailyFX

Technically,the S&P 500 index has likely broken a key support level at 3,250 – the 23.8% Fibonacci retracement. It dived further into the lower half of its Bollinger Band, with the band width widening. This may suggest that the bearish side is perhaps taking control. The MACD indicator moved further into the negative territory, flagging the risk of more downward pressure. An immediate support level can be found at 3,200, followed by 3,050 – the 38.2% Fibonacci retracement.

S&P 500 IndexDaily Chart

S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

Hang Seng Index Outlook:

The Hang Seng Index (HSI) looks set to open 1.5% lower at around 23,350, according to futures markets. Bearish sentiment from the US session may dampen risk appetite in Hong Kong equities, with technology, financials and real estate sectors probably among the more vulnerable ones.

Technically, the HSI is likely forming a bullish “AB=CD” pattern (chart below), with a potential support level found at 23,000. A firm rebound from the “D” point may signal a potential trend reversal. However, further decline below the “D” point could potentially lead to a test of the 23.6% Fibonacci retracement level at 22,900.

Hang Seng Index Daily Chart

S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

Straits Times Index Outlook:

Singapore’s Straits Times Index (STI) lagged behind its global peers with a dismal year-to-date performance of -23%. It seems that the worst is not over yet. The STI might be susceptible to a new round of selloff, albeit at a relatively slower pace, alongside US stocks.

Technically, the STI has likely broken a key support level at 2,500, and has since opened room for further losses with an eye on 2,400. Its near-term momentum appears to biased towards the downside.

Straits Times Index – Daily Chart

S&P 500 Breaks 23.8% Fibonacci, Hang Seng and Straits Times Fall

--- 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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