Equity bulls and bears whistled last night trying to finding a direction after Wall Street’s six consecutive days of rallying.
Upward momentum has shown signs of slowing down after record rally in global markets – buying momentum is running out of steam and may soon invite short-term profit taking. US markets opened sharply lower last night but managed to recover most of the earlier losses and closed marginally lower. Mild correction may still carry on in the days to come if profit-taking activities accelerate, but the downside is very much cushioned by solid fundamental and optimism at the macroeconomic level.
In Singapore, the STI is likely to enter into consolidation phase with the immediate support level at 3,500 area. This, however, is unlikely to become a major correction as solid fundamental elements cushion downsides. The next resistance level is 3,547, which is the 2015 high. Banking shares are facing some selling pressure whereas offshore & marine sector are well supported by rising crude oil prices, which are at three-year-high.
CMC’s client sentiment function shows that among CMC’s global client basis, the sentiment on S&P 500 and Singapore Free Jan contract still biased towards the upside. Top clients are positioning 64% vs. 36% in long and short S&P 500 positions respectively, whereas the case for Singapore Free is and 92% vs. 8%.
Client Sentiment – SPX 500 vs. Singapore Free Jan 2018
Japanese yen strengthened further against the greenback last night, diving over 1% as market digest and react towards Bank of Japan’s (BOJ) decision to reduce the amount of monthly JGBs purchasing by ¥190bn – a signal that the central bank is shifting towards tightening policy. Technically, USD/JPY has broken down below a narrow zone between the 112.25 and 113.50 area and tested key support level at the 111.39 area (38.2% Fibonacci retracement). Despite firmness over the past two days, there is still lack of clear direction in its daily chart. A meaningful breakdown below the support 111.32 will open room for further downside towards the next major support level at the 109.06 area (50% Fibonacci retracement).
Last night’s US DoE crude inventory dropped more than what market anticipated, marking a ninth-consecutive week decline in the US stockpile. Declining inventory, improved demand outlook and OPEC’s commitment to curb production are driving crude prices to their highest level in three years. The Brent Oil Cash contract stayed above US$69 per barrel as market sees more tightening in the supply market.
Market Calendar - Crude oil Stocks (Net Change)
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