The U.S. stock markets had ended last week with a whimper post “quadruple witching” where both the S&P 500 and Nasdaq 100 declined by -0.64% and -1.36% respectively; the second weekly consecutive homerun of losses since the week of 07 September.
Sector rotation analysis in the U.S stock markets seems to have indicated a switch into the commodities related stocks as the S&P Materials and S&P Energy sectors recorded gains of 0.93% and 2.90% respectively on the backdrop of firmer oil and copper prices (WTI crude oil futures +12.08% & Copper futures +2.22% for last week). In contrast, the heavy weighted market capitalized Consumer Discretionary and Information Technology sectors underperformed with weekly losses of -2.33% and -1.04% respectively.
The Japanese yen was the best performing currency against the USD for last week with a gain of +1.50% followed by the New Zealand dollar; +1.28%. Meanwhile, the current medium-term downtrend of USD/JPY is still holding above the 104.20 near-term support at 104.20 at this time of the writing.
Meanwhile, U.S President Trump had gave his “blessing” over the weekend to allow Oracle (NYSE:ORCL) and Walmart (NYSE:WMT) to take a stake in China based ByteDance’s TikTok. In addition, a judge in San Francisco issued a preliminary injunction to put on hold U.S. administration curbs on China’s WeChat messaging app over national security concerns.
3 Things To Look Forward
Heightened geopolitical risk over in the Taiwan Strait as China’s People’s Liberation Army aircrafts had repeatedly breached the median line between Taiwan and the Chinese mainland last week. Any further hawkish rhetoric or actions from China towards Taiwan to deter Taipei from establishing deeper ties with U.S. and other like-mined democratic countries may put a lid on risk assets such as stocks from staging a fresh round of impulsive up move.
Hong Kong’s inflation rate for August where the previous month of July recorded a decline of -2.3% year-on-year; it was the first decline in consumer prices since February 2017. Thus, another negative reading for August will indicate that deflationary forces remain intact and Hong Kong related property stocks may continue to see further downside pressure. The Hang Seng Property Index’s current year-to-date decline is at -20.1%, underperforming the benchmark Hang Seng Index’s -14.7% over a similar period.
Apple (NASDAQ:AAPL), the share price of this U.S. mega tech stock has continued to plummet where it has now declined by 23.11% from its current all-time of high of 137.98 to print an intraday low of 106.09 on last Friday and broke below a former near-term support at 111.92. Technically, Apple may see a further corrective drop towards the 96.30/93.40 support zone (gapped up from 30 July 2020 & the 50% Fibonacci retracement of the medium-term uptrend from 23 March 2020 low to 02 September 2020 high) as long as the 120.36 medium-term pivotal resistance is not surpassed. Thus, a further potential decline in the share price of Apple may
trigger a negative feedback loop into the U.S. stock market as it is the biggest component stock in the S&P 500 & Nasdaq 100 (see chart of the day).
Chart of the day
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.