S&P 500, NIKKEI 225 OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 indexes closed +0.04%, +0.19% and +0.27% respectively
- The VIX volatility index dropped to a pandemic low, underpinning market strength
- Australian, mainland China and Hong Kong bourses are shut for holidays on Monday, so trading across APAC may be light
VIX, FOMC, Yields, Bitcoin, Asia-Pacific Week-Ahead:
Wall Street equities closed modestly higher on Friday as investors shrugged off higher-than-expected US inflation data and shifted their focus to this week’s FOMC meeting. The S&P 500 index closed at all-time highs, while the Nasdaq 100 index ended a hair beneath its previous peak. The VIX volatility index slide to 15.66 – the lowest level seen since February 2020. This suggests that market sentiment remains positive but may be vulnerable to risk events.
The benchmark 10-year Treasury yield traded near a three-month low of 1.46%, calming fears about tapering Fed stimulus any time soon. Market participants expect central bank officials to remain committed to loose monetary policy even if they start to discuss the pace of monthly bond purchases this week.
Bitcoin surged more than 9% over the past 24 hours after Elon Musk said that Tesla will resume accepting the digital token for transactions if “there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend”. Prices have returned to the 38.8k area, challenging an immediate chart resistance level of 39.3k.
VIX Volatility Index
Source: TradingView
APAC markets look set to kick off the week in a mixed tone. Futures in Japan, Singapore and Thailand are trading higher, whereas those in Taiwan, South Korea, Malaysia and India are in the red. Australian, mainland China and Hong Kong bourses are shut for public holidays, so trading volume might be thin today due to fewer market participants. The economic calendar is relatively quiet too.
For the week ahead, US retail sales and the FOMC meeting dominate the economic docket alongside Australian unemployment figures. Find out more from theDailyFX calendar.
Looking back to Friday’s close, 8 out of 11 S&P 500 sectors ended higher, with 69.5% of the index’s constituents closing in the green. Financials (+0.61%) and information technology (+0.56%) outperformed, while healthcare (-0.73%) and real estate (-0.59%) trailed behind.
S&P 500 Sector Performance 11-06-2021
Source: Bloomberg, DailyFX
S&P 500 Index Technical Analysis
The S&P 500 index is trending higher within an “Ascending Channel” formed since early November, the ceiling and the floor of which serve as key support and resistance levels respectively. Prices are about to challenge the 127.2% Fibonacci extension level at 4,250. A successful breach may open the door for further upside potential. Bearish MACD divergence suggests that upward momentum may be fading however.
S&P 500 Index – Daily Chart
Nikkei 225 Index Technical Analysis:
The Nikkei 225 index is attempting to breach the ceiling of the “Descending Channel” formed since early March. A successful try may lead to a bullish trend reversal and thus open the door for further gains with an eye on 31,200. The ceiling coincides with the 100-day SMA line, and thus may serve as a strong resistance. The MACD indicator is flattening, suggesting that upward momentum may be faltering.
Nikkei 225 Index – Daily Chart
— Written by Margaret Yang, Strategist for DailyFX.com
To contact Margaret, use the Comments section below or @margaretyjy on Twitter