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S&P 500 Index Rebound May Offer Relief for Nikkei 225 and ASX 200

S&P 500 Index Rebound May Offer Relief for Nikkei 225 and ASX 200

Margaret Yang, CFA, Former Strategist



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Stocks Rebound, Jobless Claims, Commodity, Crypto, Asia-Pacific at Open:

US stocks rallied on Thursday after a three-day loss as markets shrugged off inflation concerns. With commodity prices such as copper, iron ore and crude oil retreating from their recent highs, the equity market embraced a relief rebound overnight, led by industrial, financial and utility sectors. Energy was the only one that ended lower.

US weekly jobless data came in better than expected, with 473k unemployment claims filed for the week ending May 7th, compared to a 490k forecast (chart below). The declining trend underscored strength in the labor market as economic growth is fathering pace. Favorable jobs data, alongside a higher-than-expected Purchasing Price Index (PPI) boosted sentiment, although the later may strengthen the inflation outlook as well.

Cryptocurrency market experienced heightened volatility over the past 24 hours. Bitcoin tumbled 13% after Elon Musk – the founder of Tesla – said his company will no longer accept Bitcoin for vehicle payments over environmental concerns. Prices stabilized at around the $ 49,000 mark during Thursday’s early Asia-Pacific hours, but the overall trend appears to have turned bearish. On the other hand, Dogecoin surged over 22% after Musk tweeted that he is working with Doge developers to improve system transaction efficiency, adding it as ‘potentially promising’.

Weekly US Jobless Claims

Source: Bloomberg, DailyFX

Asia-Pacific markets are positioned to open higher following a positive lead from Wall Street. Futures in Japan, Australia, Hong Kong, Taiwan, Singapore and India are in the green. Investors are eyeing tonight’s US retail sales and the University of Michigan consumer sentiment figures for clues about the health of consumer spending. Find out more from the DailyFX calendar.

Japan’s Nikkei 225 index embraced a relief rebound after falling 2.5% on Thursday. An escalated pandemic situation spooked fears about a wider state of emergency after the government extended measures on four prefectures, including Tokyo and Osaka, to May 31st. Viral concerns weighed on investor confidence, pulling the Nikkei 225 index 7% lower within the past three days. The index has likely broken a key support level and thus opened the door for further weakness.

Looking back to Thursday’s close, 10 out of 11 S&P 500 sectors ended higher, with 88.1% of the index’s constituents closing in the green. Industrials (+1.90%), financials (+1.87%) and utilities (+1.79%) were among the best performers, whereas energy (-1.35%) trailed behind.

S&P 500 Sector Performance 13-05-2021

Source: Bloomberg, DailyFX

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S&P 500 Index Technical Analysis

The S&P 500 index trended higher within an “Ascending Channel” formed since November. This suggests that the overall trend remains bullish-biased, although a technical correction appears to be underway. An immediate support level can be found at 4,055 - the 20-day SMA line. The MACD indicator formed a bearish crossover and trended lower, suggesting that upward momentum may be fading.

S&P 500 Index Daily Chart

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index broke below a key support level at 28,357 – the 100% Fibonacci extension – and thus opened the door for further losses with an eye on 26,896 – the 78.6% Fibonacci extension. Price pierced through the 10-day SMA line decisively this week, pointing to strong bearish momentum. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that further consolidation is likely.

Nikkei 225 IndexDaily Chart

Chart by TradingView

ASX 200 Index Technical Analysis:

The ASX 200 index breached below a “Rising Wedge” chart pattern, which is inherently bearish in nature. This may point to further downside potential with an eye on 6,900 and 6,837 for support. 7,126 (261.8% Fibonacci extension) remains a key resistance. The MACD indicator formed a bearish crossover and trended lower, suggesting that selling pressure is prevailing.

ASX 200 Index – Daily Chart

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--- Written by Margaret Yang, Strategist for

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.