US equities closed broadly lower on Friday night as September non-farm payroll numbers disappointed and trade risks continued to be priced-into American stocks, especially to the rich-valued technology sector.
Lower-than-expected non-farm job growth, however, is underpinned by further drop in unemployment rate - which came to 40-year low of 3.7%, as well as strong wage growth of 2.8%. Besides, Aug non-farm payrolls number was revised up sharply to 270k from 201k.
Technically, the S&P 500 index has entered into a correction as both of its 10-Day SMA and SuperTrend (10,3) have flipped downwards end of last week. Fibonacci extension suggests its immediate support and resistance level can be found at 2,847 (138% extension) and 2,950 (200% extension) respectively. The index is ranging within an ascending channel that has been formed since April, and a support can be found at the lower bound of this channel (as shown in the graph below). Momentum indicator RSI was flagging the short-term low and highs recently when it crossed significant level of 30% and 70% respectively. Right now RSI is around 40%, suggesting that the best buying opportunity is yet to come.
On Sunday, China central bank announced to cut its Reserve Requirement Ratio (RRR) for targeted banks to inject liquidity into the market, an attempt to cushion economic slowdown amid rising trade risks. The move is expected to inject some 1.2 trillion yuan into the banking system, and nearly one third of that amount will go to maturity medium-term lending facility (MLF) loans.
China stock market will resume trading today following a week-long National Day holiday. New round of easing measures is likely to boost market confidence and spur upward momentum of China A-shares, especially to banking and financial sector.
In Singapore, the Straits times Index has followed US market into consolidation phase last week, after testing strong resistance level at around 3,250 area. Immediate support level remains at 3,100 points for the Straits Times Index. China and HK market movements, in response to RRR cut, is likely to provide some support to local stocks today.
US SPX 500 - Cash
Market Calendar – US Non-Farm Payrolls
By Margaret Yang in Singapore
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