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S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher

S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher

Margaret Yang, CFA, Strategist

S&P 500, HANG SENG, ASX 200 INDEX OUTLOOK:

  • Dow Jones, S&P 500 and Nasdaq 100 closed -0.29%, -0.10% and -0.14% respectively
  • The IMF upgraded global economic growth to 6.0% from 5.5% for 2021 as outlook improved
  • A slew of Euro Area service PMI data will be in focus while traders await the FOMC minutes
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USD, IMF, California Reopen, FOMC minutes, Asia-Pacific at Open:

Wall Street equity indices paused their record rally on Tuesday, with Dow Jones and the S&P 500 retreating modestly from all-time highs amid thin trading volume. There appeared to be lack of fresh catalysts overnight to fuel further gains after Monday’s rally, allowing stocks to consolidate. News crossed the wires that California is ready to fully remove the Covid-related restrictions on June 15th. This helped boost sentiment in the consumer sector, while the information technology sector was a clear lagger.

The IMF revised up this year’s global GDP forecast to 6.0% from an earlier estimate of 5.5%, saying that “even with high uncertainty about the path of the pandemic, a way out of this crisis is increasingly visible”. The agency has also upgraded growth forecasts for the US to 6.4% this year, driven by President Joe Biden’s fiscal stimulus bill as well as a rapid rollout of Covid vaccines.

The DXY US Dollar index fell for a second day, moving closer to test the 20-day SMA line for support. It suggests that the short squeeze in the US Dollar has eased and the market continued to unwind expectations about Fed interest rate hikes ahead of tonight’s FOMC minutes release. Fed Chair Jerome Powell reiterated his dovish rhetoric in a few public appearances recently, emphasizing that the central bank is ‘patient’ and will continue to support a recovery with accommodative policies.

DXY US Dollar Index

S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher

Chart from TradingView

Asia-Pacific equities are poised to open mixed, with futures across Japan, Singapore, Malaysia, Thailand and Indonesia pointing to open lower. Those in Australia Hong Kong, South Korea, Taiwan and India are in positive territory. Australia’s ASX 200 index opened 0.45% higher, led by information technology (+1.42%), consumer discretionary (+0.20%) and real estate (+0.18%) sectors, whereas healthcare (-0.33%) and industrials (-0.05%) trailed behind.

Hong Kong’s Hang Seng Index (HSI) resumes trading today after a long holiday break. Market participants have a lot to digest, including upbeat US nonfarm payrolls print, strong China service PMI readings, vaccine progress and volatility in crude oil prices.

Looking ahead, a slew of Markit service PMI readings from the Euro Area headline the economic docket alongside Canadian balance of trade and EIA crude inventory data. FOMC minutes for the March meeting will be released later tonight, and it will be closely scrutinized by traders to assess the Fed’s policy guidance. Find out more from theDailyFX calendar.

Looking back to Wednesday’s close, 6 out of 11 S&P 500 sectors ended higher, with 53.1% of the index’s constituents closing in the green. utilities (+0.53%), consumer discretionary (+0.33%) and consumer staples (+0.33%) were among the best performers, while information technology (-0.38%) trailed behind.

S&P 500 Sector Performance 06-04-2021

S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher

Source: Bloomberg, DailyFX

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S&P 500 Index Technical Analysis

The S&P 500 indexextended higher towards the ceiling of the “Ascending Channel”, which may serve as an immediate resistance level. The index has broken a psychological resistance level at 4,000, opening the door for further upside potential with an eye on 4,125 (161.8% Fibonacci extension). The overall trend remains bullish-biased as suggested by the upward-sloped moving averages. The MACD indicator is trending higher above the neutral midpoint, suggesting that bulls are still in control.

S&P 500 Index Daily Chart

S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher

Hang Seng Index Technical Analysis:

The Hang Seng Index (HSI) broke above the “Descending Channel” as highlighted in the chart below, pointing to a potential bullish trend reversal. An immediate resistance level can be found at the 50-day SMA line (29,300), breaking which may intensify near-term buying pressure and expose the next resistance level of 29,500 – the 38.2% Fibonacci extension. The MACD indicator is trending higher beneath the neutral midpoint, suggesting that upward momentum is building.

Hang Seng IndexDaily Chart

S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher

ASX 200 Index Technical Analysis:

The ASX 200 index hit a key resistance level of 6,935 (the 200% Fibonacci extension) and has retraced since. The overall trend remains bullish-biased as suggested by the upward-sloped moving average lines. A successful attempt to breach 6,935 may open the door for further upside potential with an eye on 7,000. A failed attempt however, may result in a deeper pullback towards 6,800 for support. The MACD indicator is trending higher above the neutral midpoint, suggesting that bullish momentum is building.

ASX 200 Index – Daily Chart

S&P 500 Pauses Record Rally, Hang Seng and ASX 200 Edge Higher
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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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