The Bear Is Back- SPX Returns to Nov 2020 Levels

Weekly Wrap Content for the week of Sep 30:

1. Week 39 major indexes performance;

2. Week 39 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S

For the week ended Sep 30, the U.S stocks broke below its mid-June lows and fell back to November 2020 levels. The SPX index closed this week at its third consecutive weekly decline, and also a third consecutive quarter of declines for the index for the first time since 2009. Attributed to the turmoil in UK financial markets and signs that the Fed still has some way to go in its efforts to temper inflation while the yield on the benchmark 10-year U.S. Treasury note briefly breached 4% for the first time since 2008. (Bond prices and yields move in opposite directions.) Refer to major indexes’ weekly performance tables below.

Key highlights for the week and outlook:

1.    Inflation still hot: Data showing continued resilience in the economy and inflationary pressures despite tightening monetary policy. Weekly jobless claims fell to 193k, well below expectation. Meanwhile, the core personal consumption expenditures price index, rose to 4.7%(annualized) in Q2- well above expectations of around 4.4% as well as the Fed’s long-term 2.0% inflation target. 

2.    10-year bond yield moved steadily higher this year, and went up nearly 4% on Tue. The rapid move higher in yields has put downward pressure on equity markets and valuations, especially the higher-valuation and more speculative parts of the market. 

3.    Strong USD. The U.S. dollar has been moving higher all year, with the DXY dollar index up nearly 17% this year and up 25% since early 2021. It reached the highest in more than a decade this week. There have been some disruptions in global markets due to a higher dollar, as major currencies around the world have weakened, signaling less confidence in those economies. In addition, the stronger dollar has put downward pressure on emerging-market equities, with the MSCI Emerging Market Index down nearly 30% this year.

SPX sectors in play

Only one out of 11 sectors in the S&P 500 ended green this week. Energy(XLE) rebounded 2.2% this week. Technology(XLK) sector was among the top losers this week.Refer to the SPX sector index's weekly performance tables below.

Technically all three major indexes recorded 3^rd losing streak, with Dow and SPX hit new low since Nov 2020 and Nasdaq(COMP) closed just inches above its Jun low.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China’s stock markets fell as currency weakness and signs of a flagging economy fueled concerns about the outlook. The broad, capitalization-weighted Shanghai Composite Index(SSE weekly Chart) fell 2.1% and the blue chip CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, shed 1.3%.

The yuan traded at 7.0898 per U.S. dollar late Friday versus 7.1066 a week earlier. The currency fell to a 28-month low last Monday and has lost more than 11% against the greenback this year. Like many emerging markets currencies, the yuan has weakened against a surging U.S. dollar boosted by the Federal Reserve’s aggressive interest rate hikes. Officials stepped up efforts to slow the currency’s slide.

The private Caixin PMI fell to a worse-than-expected 48.1 in September from 49.5 in August, below the 50-point reading that separates growth from contraction. Mainland China’s financial markets were scheduled to be closed for the Golden Week holiday, a seven-day holiday starting October 1 that typically marks a peak period for travel and consumption. However, ongoing coronavirus restrictions in major cities are expected to weigh on domestic tourism and retail spending this year.

Hang Seng index (.HSI weekly chart) lost another 4% this week recorded its 5^th week losing streak. The index lost 13.7% in Sep and fell 21% this quarter Q3 for the biggest decline since the same three months in 2011. Top losers in September included Alibaba and Tencent as they slumped at least 17 per cent; HSBC sank 15 per cent.

Singapore

STI index (STI weekly chart) lost 96.86pts or 3% this week, its largest loss since the week in May 9 this year. Technically, STI index next key support to watch at around 3090 area which is the consolidation bottom between Jun-Jul, also confluence with its uptrend line starts from the low of Mar 2020 pandemic outbreak.

Source: Contents/Data including information from various public market reports