S&P 500 Hovers at Record High, Hang Seng and Nikkei 225 Eye Pullback
S&P 500, HANG SENG, NIKKEI 225, ASIA-PACIFIC MARKET OUTLOOK:
- The S&P 500 index closed marginally higher as tech gained, but two thirds of the stocks fell
- Asia-Pacific indices look set to pull back slightly from their recent highs
- Southbound inflow in HK via stock connections fell for a second day, risking a pullback in the HSI
S&P 500, Hang Seng, Earnings, Asia-Pacific Stocks Outlook:
Asia-Pacific stocks look set to open broadly lower after Wall Street saw a mixed trading session. The S&P 500 index edged marginally higher, led by heavy-weight information technology (+1.32%), consumer discretionary (+0.55%) and communication services (+0.26%), while two thirds of its constituents finished lower. Investors are perhaps looking for fresh catalysts to support Wall Street’s record-breaking rally when stock market valuations are close to two-decade highs.
US earnings continued to deliver positive surprises, with 15 out of 19 S&P 500 companies beating market forecasts last night (table at the end). Intel’s share price fell 4.5% in aftermarket trade despite posting a record revenue and higher-than-expected EPS. So far in the earnings season, more than 85% of the blue chips have smashed analysts’ forecasts. Read more on my earnings outlook report.
S&P 500 Sector Performance 21-01-2021
Source: Bloomberg, DailyFX
A mixed US session may set a sour tone for Asia-Pacific markets, with equity futures pointing to a lower start across Japan, Australia, Hong Kong, Malaysia and India on Friday morning. Japan’s Nikkei 225 stock market benchmark looks set to open mildly lower after gaining 0.82% on Thursday.
The Hang Seng Index (HSI) is facing some selling pressure as the index attempts to challenge a psychological resistance level at 30,000. The HSI registered a whopping 15% gain over the last month, propelled by substantial amount of southbound inflow via the Hong Kong-Shanghai and Hong Kong-Shenzhen stock connections. It is worth noting that daily southbound inflowhas fallentwo days in a row to HK$ 16,263 million from a record high of 26,592 million seen on January 19th, reflecting cooling appetite from mainland investors for Hong Kong stocks. Total southbound flows contributed to around 30% HKEX's daily turnover recently.
Hang Seng Index vs. Daily Southbound Net Flow – 12 Months
Source: Bloomberg, DailyFX
Australia’s ASX 200 Index opened 0.11% lower amid a defensive trading session. Healthcare (+1.99%), consumer discretionary (+1.25%) and consumer staples (+0.52%) were leading while energy (-2.06%) and information technology (-1.71%) were lagging.
On the macro front, UK retail sales and a string of Markit Manufacturing PMIs across the EU and US will be closely eyed on Friday. Find out more from DailyFX calendar.
S&P 500 Index Technical Analysis:
Technically, the S&P 500 index extended its upward trajectory within an “Ascending Channel” as highlighted in the chart below. The bull trend is well-supported by its 20-Day Simple Moving Average (SMA) line, albeit the upper ceiling of the channel may serve as an immediate resistance. Support and resistance levels can be found at 3,893 (100% Fibonacci extension) and 3,804 (76.4% Fibonacci extension) respectively.
S&P 500 Index – Daily Chart
Hang Seng Index Technical Analysis:
The Hang Seng Index is riding a strong trend and is about to challenge a psychological resistance level at 30,000. Breaching it may open the door for further upside potential with an eye on 30,933 – the 161.8% Fibonacci extension. A failed attempt, however, may lead to a technical pullback to test an immediate support level at 29,038 – the 100% Fibonacci extension. The RSI indicator stretches beyond the overbought threshold of 70, reflecting strong upward momentum but also warns about a technical correction.
Hang Seng Index – Daily Chart
Nikkei 225 Index Technical Analysis:
The Nikkei 225 index hit the 100% Fibonacci extension level of 28,770 and has retraced slightly since. The overall trend remains bullish as highlighted in the two “Ascending Channels” below, although a period of consolidation may be seen before the index attempts higher highs. A bearish MACD crossover may hint at short-term pressure. Immediate support and resistance levels can be found at 27,800 (76.4% Fibonacci extension) and 28,770 (100% Fibonacci extension) respectively.
Nikkei 225 Index – Daily Chart
S&P 500 Earnings Calendar 21-22nd January 2021
TAL Education Group
M&T Bank Corp
Truist Financial Corp
Fifth Third Bancorp
Travelers Cos Inc/The
Baker Hughes Co
Northern Trust Corp
FuelCell Energy Inc
Union Pacific Corp
Intuitive Surgical Inc
Seagate Technology PLC
PPG Industries Inc
International Business Machine
SVB Financial Group
People's United Financial Inc
Boston Private Financial Holdi
Regions Financial Corp
Kansas City Southern
Huntington Bancshares Inc/OH
New Oriental Education & Techn
Reliance Industries Ltd
Reliance Industries Ltd
Ally Financial Inc
--- 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.