Market opinion diverges on how far the US stocks consolidation will extend.

With bulls seeing this correction ending soon, whilst bears see more sell-off to come as market liquidity is tightening up and earnings growth is likely to have peaked. It may leave the upcoming earnings season to clarify the outlook of US shares, especially the technology stocks.

Technically, momentum indicators RSI and DMI suggest that the correction is overdone and market has shown signs of stabilisation via falling volatility index. The S&P 500 Index has found some support at around 2,750 points, the 78.6% Fibonacci Extension level. RSI has climbed to 24%, still in the oversold territory. A move above 30% mark is viewed as a bullish signal. DMI band has started to shrink, suggesting the worst of sell-off is over in the short term. Trend indicators SuperTrend (10,3) and 10-Day SMA are both sloped downwards, as they are both lagging indicators.

Market participants are weighing a growing list of concerns including monetary tightening, rising bond yields, high expectation on earnings growth and trade risks, which outweighed strong economic fundamentals since last week, causing the biggest equity slumped seen since Feb 18. Bearish sentiment has spread over to the greenback too, with the US dollar Index dropping to 94.7 area from recent high of 95.7 area. Gold price rebounded sharply recently, breaking out above a key level of US$1,210 and extending gain to the US$1,228 this morning. Trend indicators SuperTrend (10,3) and 10-Day SMA have both turned upward-sloping, suggesting a potential bull run is forming.

Against the backdrop of the softening dollar and rising political tensions between US and Saudi due to the disappearance of an US reporter in Turkey, crude oil price stopped bleeding and started to rebound. Brent oil price has found some support at around US$80.3 area with immediate support and resistance levels at $78.9 and $81.2 respectively.

In Singapore, the Straits Times Index has followed US into a technical correction last week, and this picture is unlikely to change until US market stabilises and earnings season feed investors with positive surprises. Before that, the STI is likely to consolidate within the narrow band of 3,000 to 3,100 points.

US SPX 500 - Cash

By Margaret Yang in Singapore

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