S&P 500 Index Rebound May Offer Relief for Nikkei 225 and ASX 200

※Dow Jones, S&P 500 and Nasdaq 100 closed +1.29%, +1.22%, and +0.83% respectively

※US stocks rebounded as metal prices retreated, jobless data beat expectations

※The Nikkei 225 and ASX 200 indexes look set to open higher. Bitcoin stabilized while Dogecoin rallied.

Stocks Rebound, Jobless Claims, Commodity, Crypto, Asia-Pacific at Open:

US stocks rallied on Thursday after a three-day loss as markets shrugged off inflation concerns. With commodity prices such as copper, iron ore and crude oil retreating from their recent highs, the equity market embraced a relief rebound overnight, led by industrial, financial and utility sectors. Energy was the only one that ended lower.

US weekly jobless data came in better than expected, with 473k unemployment claims filed for the week ending May 7th, compared to a 490k forecast (chart below). The declining trend underscored strength in the labor market as economic growth is fathering pace.Favorable jobs data, alongside a higher-than-expected Purchasing Price Index (PPI) boosted sentiment, although the later may strengthen the inflation outlook as well.

Cryptocurrency market experienced heightened volatility over the past 24 hours. Bitcoin tumbled 13% after Elon Musk – the founder of Tesla – said his company will no longer accept Bitcoin for vehicle payments over environmental concerns. Prices stabilized at around the $ 49,000 mark during Thursday’s early Asia-Pacific hours, but the overall trend appears to have turned bearish. On the other hand, Dogecoin surged over 22% after Musk tweeted that he is working with Doge developers to improve system transaction efficiency, adding it as‘potentially promising’.

Weekly US Jobless Claims

Asia-Pacific markets are positioned to open higher following a positive lead from Wall Street. Futures in Japan, Australia, Hong Kong, Taiwan, Singapore and India are in the green. Investors are eyeing tonight’s US retail sales and the University of Michigan consumer sentiment figures for clues about the health of consumer spending.

Japan’s Nikkei 225 index embraced a relief rebound after falling 2.5% on Thursday. An escalated pandemic situation spooked fears about a wider state of emergency after the government extended measures on four prefectures, including Tokyo and Osaka, to May 31st. Viral concerns weighed on investor confidence, pulling the Nikkei 225 index 7% lower within the past three days. The index has likely broken a key support level and thus opened the door for further weakness.

Looking back to Thursday’s close, 10 out of 11 S&P 500 sectors ended higher, with 88.1% of the index’s constituents closing in the green. Industrials (+1.90%), financials (+1.87%) and utilities (+1.79%) were among the best performers, whereas energy (-1.35%) trailed behind.

S&P 500 Sector Performance 13-05-2021

S&P 500 Index Technical Analysis

The S&P 500 index trended higher within an “Ascending Channel” formed since November. This suggests that the overall trend remains bullish-biased, although a technical correction appears to be underway. An immediate support level can be found at 4,055 – the 20-day SMA line. The MACD indicator formed a bearish crossover and trended lower, suggesting that upward momentum may be fading.

S&P 500 Index – Daily Chart

Nikkei 225 Index Technical Analysis:

The Nikkei 225 index broke below a key support level at 28,357 – the 100% Fibonacci extension – and thus opened the door for further losses with an eye on 26,896 – the 78.6% Fibonacci extension. Price pierced through the 10-day SMA line decisively this week, pointing to strong bearish momentum. The MACD indicator is trending lower beneath the neutral midpoint, suggesting that further consolidation is likely.

Nikkei 225 Index – Daily Chart

ASX 200 Index Technical Analysis:

The ASX 200 index breached below a “Rising Wedge” chart pattern, which is inherently bearish in nature. This may point to further downside potential with an eye on 6,900 and 6,837 for support. 7,126 (261.8% Fibonacci extension) remains a key resistance. The MACD indicator formed a bearish crossover and trended lower, suggesting that selling pressure is prevailing.

ASX 200 Index – Daily Chart

CRUDE OIL OUTLOOK

※Crude oil prices fall as Colonial Pipeline restarts, Biden grants Jones Act waiver

※US retail sales, consumer confidence data may stoke Fed policy pivot speculation

※WTI contract inches closer to confirming a bearish Double Top reversal pattern

Crude oil prices fell as the Colonial Pipeline – the largest gasoline delivery conduit in the US – restarted operations after a hacking incident. Its operators reportedly paid close to US$5 million in ransom. The Biden administration also waived Jones Act restrictions on fuel deliveries by foreign tankers.

The White House move to ease supply shortages and Colonial’s return seemed to ease fears about a lasting shortage of fuel supply, driving prices lower. Broader weakness across the raw materials space added to selling pressure. Averages tracking industrial metals and agricultural commodities prices fell.

Looking ahead, the spotlight turns to April’s US retail sales data as well as the May edition of the University of Michigan gauge of US consumer confidence. Receipts are expected to rise by 1 percent, marking deceleration from the 9.8 percent rise seen in March. Sentiment is penciled in at a 14-month high.

US economic news-flow has improved relative to baseline forecasts recently, which may foreshadow upside surprises on the day’s statistical roundup. That may stoke reflation bets and inspire speculation about a sooner-than-expected reduction of Fed stimulus, boosting the US Dollar and pushing crude oil prices lower.

CRUDE OIL TECHNICAL ANALYSIS

Crude oil prices are inching closer to confirming the formation of a bearish Double Top pattern in the following a test of trend-defining resistance in the $66-68/bbl area (as expected). Prices broke the near-term sequence of higher highs and lows, deflating upward momentum. From here, breaching immediate support at 63.53 would open the door for a move to test the minor barrier at 60.61, followed by the would-be Double Top’s neckline at 57.25. A daily close below this critical threshold would complete the bearish formation, implying a measured below the$47 figure thereafter.

Alternatively, securing a hold above the $68/bbl mark would probably neutralize selling pressure and set the stage for extension upward. The 38.2% Fibonacci expansionat 70.37 approximates initial resistance, followed by the 50% level at 74.42.

Gold Price Forecast: Will XAU/USD Shrug off a Higher US Retail Sales Outcome?

Gold prices recovered some lost ground as Treasury yields declined US retail sales and sentiment data eye, dovish Fed may numb impact XAU/USD near-term trend remains upside focused, eyes on key SMA

Anti-fiat gold prices aimed cautiously higher on Thursday, reversing some of the losses experienced the prior day. That is when a much higher-than-anticipated US CPI report bolstered Fed tapering expectations, driving up Treasury yields and the US Dollar. Both of the latter moving higher can be detrimental to the yellow metal, so Thursday’s price action might have been a recalibration of the outlook for monetary policy.

St. Louis Fed President James Bullard spoke over the past 24 hours, saying that it is still ‘too early’ to talk about tapering bond purchases. He reiterated the central bank’s persistent dovish tone, perhaps calming bond markets. A decline in commodity prices, from crude oil to copper, may have also further calmed market sentiment.

Over the remaining 24 hours, all eyes are on US retail sales and University of Michigan sentiment data. Better-than-expected outcomes could rekindle bond rates, placing XAU/USD at risk. Having said that, the Fed’s dovish tone could numb a market reaction to unexpected beats. Wholesale inflation crossed the wires higher-than-anticipated on Thursday, but failed to translate into a reaction similar to the CPI data.

Most Asia-Pacific stock market benchmarks traded in the green on Friday, opening the door to a rosy day for risk appetite heading into the weekend. If this sentiment holds, the US Dollar may be vulnerable, perhaps boding well for the yellow metal.

GOLD TECHNICAL ANALYSIS

XAU/USD remains biased to the upside in the near term from a technical standpoint. Rising support from the end of March seems to be keeping the focus tilted higher. That said, there is room for gold prices to weaken before testing that trendline. Keep an eye on the 50-day Simple Moving Average (SMA). If the latter holds, XAU/USD may retest the key 1838 – 1845 resistance zone. Above that sits falling resistance from August.

XAU/USD 4-HOUR CHART

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