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DOW JONES, HANG SENG, ASX 200 INDEX OUTLOOK:

  • Dow Jones futures edged lower amid stimulus and political uncertainties
  • Hang Seng Index (HSI) surged 1.4% as Shanghai gained, challenging a key resistance at 24,450
  • Australia’s ASX 200 index ranged at around 6,100, upward momentum slowed
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Dow Jones Index Outlook:

Dow Jones futures are trading slightly lower at Asia mid-day hours, as profit-taking activities ramp up following last week’s big gains. Market participants are perhaps shrugging off recent election-related uncertainty and look beyond for post-election stimulus hopes and the Q3 US earnings season.

According to Factset reports, analysts have revised up S&P 500 earnings to now see a decline of -20.5% YoY in Q3 2020, compared to the -25.3% forecast seen in June. This is mainly due to upward revisions to EPS estimates and positive EPS surprises. Uncertainty still remains for the upcoming earnings season, as fewer companies have issued EPS guidance compared to the years before.

Source: factset

On the macro side, this week’s key market events include:

  • October 12th (Monday): China new Yuan loans, ECB President Lagarde speech
  • October 13th (Tuesday): China balance of trade, Germany inflation, UK employment change, US inflation
  • October 14th (Wednesday): Singapore advanced Q3 GDP, MAS policy statement, South Korea rate decision
  • October 15th (Thursday): Australia unemployment rate, China inflation, Indonesia balance of trade, US initial jobless claims, EIA crude inventory report
  • October 16th (Friday): Eurozone core inflation, US retail sales, US University of Michigan consumer sentiment

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Asia-Pacific markets were mixed on Monday, with mainland China and Hong Kong leading the gains. Japan, Thailand and Malaysia equities drifted lower. Australia’s ASX 200 index fluctuated at around 6,100 as the Australian Dollar fell.

Sector-wise, information technology (+1.23%), communication services (+1.11%) and consumer staples (+0.62%) were among the best performers in Dow Jones Industrial Average last Friday. Energy (-1.62%), financials (-0.10%) and materials (-0.04%) were lagging.

Dow Jones Index Sector Performance 9-10-2020

Source: Bloomberg, DailyFX

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Technically, the Dow Jones index looks set to extend its upward trajectory after the formation of a bullish “AB=CD” pattern in September. It has since broken above its 20- and 50-Day Simple Moving Average (SMA) lines and aims for more upside progress. The Bollinger Bands indicator has widened recently as price tests its upper bound, which may be perceived as an immediate resistance level. The near-term trend appears bullish-biased, as the MACD indicator suggests.

Dow Jones Index Daily Chart

Hang Seng Index Outlook:

Hang Seng Index (HSI) surged 1.4% on Monday, led by tech names Tencent (+2.41%), Xiaomi (+4.77%) and Alibaba (+1.75%). Today, the PBoC – China’s central bank – set its daily yuan fixing at 6.7126, weaker than most analysts’ forecasts. The action was probably taken to tackle the currency’s recent trend after it registered a 7% gain against the Greenback in the past four months.

Technically, HSI is moving upwards after the formation of a bullish “AB=CD” pattern, similar to the case of Dow Jones and S&P 500 index. It is now facing an immediate resistance level at 24,450 – the 76.4% Fibonacci retracement. 24,450 is also where its 50-Day SMA lies. Breaking above 24,450 will likely open room for more upside potential towards 24,900 – the previous high.

Hang Seng Index Daily Chart

ASX 200 Index Outlook:

Australia’s ASX 200 index has likely come to an immediate resistance level of 6,100 – where it attempted to break for few times since June 2020. Its upward momentum as slowed down recently, according to the MACD indicator. An immediate support level could be found at 6,000, where its 50-Day SMA lies. Breaking above the key resistance of 6,100 may open room for more gains with an eye on 6,220.

— Written by Margaret Yang, Strategist for DailyFX.com

To contact Margaret, use the Comments section below or @margaretyjy on Twitter