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US S&P 500 Closed Near 5-Year Highs; Earnings – The Next Market Catalyst
Perspective | 14 January 2013
By: Ernest Lim
Articles (134) Profile

Most Asian markets had jumped for the past two weeks after a last minute initial resolution of the fiscal cliff in Washington. See Table 1 below for the indices’ performances over the past two weeks.

Table 1: Indices’ performance over the past two weeks

Source: Bloomberg; Ernest’s compilations

US corporate results unofficially started with Aloca which reported results on last Tuesday after the close of US markets. This week, earnings announcement will begin in earnest led by the financial shares. The financial sector, as measured by the KBW Index, has seen an impressive 23 percent share price appreciation over the last year. It has jumped almost 30 percent since the low in June 2012. Consequently, the earnings announcements from Goldman Sachs, JP Morgan Chase on Wednesday and Bank of America, Citigroup on Thursday would be keenly awaited.

Other noteworthy companies include the technology giant Intel and General Electric which report results on Thursday and Friday respectively. Thomson Reuters I/B/E/S estimates that S&P 500 companies would report a 1.9 percent growth for both the top and bottom line respectively.

2 weeks ago, I mentioned that the key levels to watch for the S&P 500 chart were 1,386 & 1,343. S&P 500 futures did dip to the level of around 1,385 before news of the resolution on the fiscal cliff reversed the decline. With reference to Chart 1 below, S&P 500 has to clear the intraday high of 1,475 formed on 14 September 2012 before it can move higher.

Chart 1: S&P 500 chart – 1st resistance 1,475 (intraday high seen on 14 Sep-12)

Source: CIMB itrade platform complimentary charts

On the economic data front, for the early part of the week, we would expect to hear a few Federal Reserve members’ speech with Ben Bernanke’s speech on Tuesday morning 5 a.m. (SIN time) being the most important. US manufacturing and retail sales to be released on Tuesday would also be of significance. On Wednesday, we would have a read on US Beige Book. US manufacturing index and housing data would be released on Thursday and consumer sentiment to be on tap on Friday.

Besides US economic data, French & Spanish 10-year Bond Auction would also be of significance (currently less significant than last year). China data would also be keenly watched with its array of economic reports on Friday. Examples are GDP, fixed asset investment; industrial production and retail sales. (Please refer to “Summary of Economic Calendar for the Week ahead (SIN time)” below for a more comprehensive list of important economic events.)

Our Singapore market, as measured by (Straits Times Index) STI, appreciated only 0.8 percent for the past two weeks which is lesser than the other Asian markets. STI is likely to soften on Monday, led by banks and property counters after the slew of property policy tightening measures announced after market close on Friday. Good supports for the STI can be seen at 3,179 to 3,182 and 3,120 to 3,140.

Sino Grandness has surged 61 percent from $0.465 on 5 October to $0.750 on 11 January 2013. It is overbought at this level with RSI at 83.4. Readers who are interested to know more about Sino Grandness can refer to my writeup on shares Investment http://www.sharesinv.com/articles/2012/10/12/sino-grandness-potential-spin-off-in-the-making/. You can also email me at crclk@yahoo.com.sg for Sino Grandness analyst reports.

Please note that the above is my personal opinion and may not cater to your specific risk profile etc. The question of when to buy / sell and what to buy / sell differs greatly from individual to individual. Furthermore, it is extremely important to bear in mind that the market outlook is never static. It can change suddenly if there are sudden big events unfolding from the market – some events can happen as quickly as a few hours.

STI supports and resistances are:

Current: 3,216.50

Support 1: 3,206-3,209

Support 2: 3,179-3,182

Support 3: 3,150

Support 4: 3,133-3,140

Support 5: 3,120

Resistance 1: 3,229

Resistance 2: 3,240-3,246

Resistance 3: 3,259

Resistance 4: 3,282 – 3,286

Resistance 5: 3,300

*Supports and resistances are not static levels. They may be subject to change daily.

*Summary of Economic Calendar for the Week ahead (SIN time)

14 Jan, Mon: (USD) FOMC Member Evans Speaks; (EUR) Europe & Italian Industrial Production; (USD) Fed Chairman Bernanke Speaks

15 Jan, Tues: **(CNY) Foreign Direct Investment; (JPY) Prelim Machine Tool Orders; (USD) FOMC Member Rosengren Speaks / Core Retail Sales / Retail Sales / PPI / Empire State Manufacturing Index;

16 Jan, Wed: (JPY) Core Machinery Orders; (EUR) Italian Trade Balance; (USD) Core CPI / Industrial Production / Crude Oil Inventories / Beige Book;

17 Jan, Thurs: (EUR) ***French & Spanish 10-y Bond Auctions; (USD) Building Permits / Unemployment Claims / Housing Starts / Philly Fed Manufacturing Index;

18 Jan, Fri: (CNY) GDP / Fixed Asset Investment / Industrial Production / NBS Press Conference / Retail Sales; (GBP) Retail Sales; (USD) Prelim UoM Consumer Sentiment;

*All economic data especially China data (if any) are subject to changes without notice. The above list is not exhaustive. I have merely listed the economic data which I feel has more impact to the market.

**Foreign Direct Investment is tentatively scheduled on 15-17 Jan, (Tues – Thurs).

***French & Spanish 10-y Bond Auctions are tentatively scheduled on 17 Jan, Thurs.

Please refer to Forex Factory Calendar for a more detailed list of economic events.

P.S: The above is part of a bi-weekly newsflash which I send out to my clients on a weekend.

All the best for your investment and trading!

Information sources: Various sources such as Bloomberg, Dow Jones, Forex calendar, Zacks Investment Research, Reuters, SGX, Yahoo Finance, and Business Times etc.

Disclaimer
The information contained herein is the writer’s personal opinion and is provided to you for information only and is not intended to or nor will it create/induce the creation of any binding legal relations. The information or opinions provided herein do not constitute an investment advice, an offer or solicitation to subscribe for, purchase or sell the investment product(s) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of this information. Investments are subject to investment risks including possible loss of the principal amount invested. The value of the product and the income from them may fall as well as rise. You may wish to seek advice from an independent financial adviser before making a commitment to purchase or invest in the investment product(s) mentioned herein. In the event that you choose not to do so, you should consider whether the investment product(s) mentioned herein are suitable for you. The writer will not, in any event, be liable to you for any direct/indirect or any other damages of any kind arising from or in connection with your reliance on any information in and/or materials appended herein. The information and/or materials are provided “as is” without warranty of any kind, either express or implied. In particular, no warranty regarding accuracy or fitness for a purpose is given in connection with such information and materials.
Ernest Lim is a CFA, CA and has worked at GIC Special Investment. He has a solid feel of the markets and financial world and is now a remisier.

Please click here for more information about this author.


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