SG SESSION (Supported by Window Support Range, Mini Uptrend Channel Formed)
The Straits Times Index (STI) recovered a further +1.4% (+38.69 points) to extend its 2 consecutive week of rally.
STI is currently supported by the Window Support Range highlighted over the previous two weeks after the confirmation of on the Bullish Reversal Candlestick Pattern (Bullish Doji Star). It has also beached the resistance at 2,800 level, forming a higher high within this mini uptrend channel. However, do note that the breached of this resistance level is met with extremely unconvincing illiquid transaction volume. It is likely for STI to whipsaw along the 2,800 range over the next few days of trading session.
The levels to watch for the week are 2,705 – 2,600 window support range level, and next resistance to watch for is at 2,850 major resistance level.
US SESSION (S&P 500 Downtrend Formations Negated, Towards Testing 2016 High)
The S&P500 rallied +2.3% (+46.74 points), negating its potential downtrend formation highlighted in the chart above.
As highlighted over the past two weeks, S&P 500 rebounded with a Bullish Reversal Candlestick Pattern (Hammer) signal on 19th May (Thursday). However, do note the rally over the past 7 sessions are accompanied with decreasing transacted volume. This is a bearish reflection of divergence for S&P 500 within its absolute price and the transacted volume.
At the current junction, S&P is looking to test its year’s high at 2,110 level (immediate resistance). A break of this level will be met with S&P 500 historical all time high resistance range at 2,130-2,135 levels. The support to watch for the week is 2,075 level.
5 things to watch on the economic calendar this week
1. U.S. nonfarm payrolls report (Friday)
The consensus forecast is that the data will show jobs growth of 161,000 last month, following an increase of 160,000 in April, the unemployment rate is forecast to dip to 4.9%, while average hourly earnings are expected to rise 0.2% after gaining 0.3% a month earlier.
An upbeat employment report would help support the case for a summer rate hike by the Federal Reserve.
2. U.S. ISM PMI surveys (Wednesday)
The gauge is expected to inch down 0.3 points to 50.5. Anything above 50.0 signals expansion.
Meanwhile, the ISM is to report on May service sector activity on Friday, amid expectations for a modest decline.
3. European Central Bank policy meeting (Thursday)
The European Central Bank’s interest rate decision is due with most of the focus likely to be on President Mario Draghi’s press conference 45 minutes after the announcement as well as updated inflation and growth forecasts.
The consensus is that the ECB will leave interest rates on hold and reaffirm its focus on implementing the stimulus package announced in March, which included purchases of corporate bonds and a new round of so-called TLTRO loans for banks, both due to kick off in June.\
4. China manufacturing PMIs (Wednesday)
The official China’s manufacturing purchasing managers’ index is forecast to inch down 0.1 points to 50.0 in May, while the Caixin survey is expected to dip to 49.3 from 49.4 in the preceding month. A reading below 50.0 indicates industry contraction.
5. OPEC meeting (Thursday)
Most market analysts expect the oil cartel to keep their production quota unchanged amid rising prices.
The oil cartel’s most recent meeting in Qatar in April ended without agreement to freeze output at current levels due to Saudi Arabia’s insistence that Iran be part of the agreement.
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