US technology shares benchmark tumbled 1.4% last night, as technology giants are facing pressures of a ‘reality check’ as many of them have climbed to record highs in anticipation of another optimistic earning season.

Disappointing results from Facebook and Twitter further catalysed the sell-off, as the valuations are rich, and even those who beat analysts’ forecast failed to impress the shareholders. In a market full of complacency, the downside risk is larger than the upside potential should any earnings miss occurs.

Technically, the S&P 500 index has come off from the upper bound of an ascending channel. Uptrend remains intact as its SuperTrend (10,3) remains in upward shape, despite the RSI and 10-Day SMA showing signs of weaknesses. Traders can watch for signals from SuperTrend (10,3), MACD and DMI for clues of trend reversing. 

Today in Asian market, investors are eyeing the BOJ policy meeting and China July PMI for directions of USD/JPY and USD/CNH. BOJ’s policy guidance is important as BOJ is one of the most dovish central banks around the globe and if Kuroda could permit JGB yields to fluctuate more around zero percent target or amend its current JPY$80 trillion bond purchase, we will see spiking volatiltiy in yen pairs.

China Manufacturing PMI is widely viewed as a key indicator of China’s economic activitiy and has influence on stock and currency markets. Investors are placing extra scrunity in this month’s data to assess the impact of trade tension on business decisions. The Caixin China PMI came out earlier this month was below consensus, showing slowdown in private sector manufacturing activities due to lower export sales.

In Singapore, weak sentiment that came through US market overnight has led to lower opening of STI today. Investors are staying on the sideline waiting for big earnings from the banks this week to paint a better picture of economic outlook. Unlike the US, Singapore market has experienced months’ of consolidation since February so the downside is cushioned by reasonable valuation and attractive dividend payout.

US SPX 500 – Cash

By Margaret Yang in Singapore

 

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