On Monday, the SET traded within a narrow range, between 1,511.5 and 1,501.62, and managed to close up 0.91 points after the market digested the U.S. non-farm payroll report released the previous Friday. The U.S. Bureau of Labor Statistics (BLS) said that the U.S. government and private businesses added 280,000 jobs in May to the U.S. economy, better than expectations. Economists had been expecting a gain of 225,000 jobs. Strong jobs reports in coming months could trigger the first rate hike by the U.S. Federal Reserve, sooner rather than later.

The SET sold off 1.06% on Tuesday, along with most of the Asian-Pacific markets, ahead of the MSCI decision on the inclusion of China’s A-shares in the MSCI Index. If the China A-shares were included, all MSCI Emerging Markets (EM) ETFs would need to be rebalanced. Some shares from the emerging markets, including the SET in the MSCI EM index, would need to be sold in order to make room for the China A-shares. 

The MSCI, formerly known as Morgan Stanley Capital International, is a US-based provider of equity, fixed income, and hedge fund stock market indexes, and equity portfolio analysis tools. The MSCI EM Index captures large- and mid-cap representation across 23 emerging market countries. Over U.S. $9.5 trillion in assets is estimated to be benchmarked to MSCI indexes.

The MSCI said on Wednesday that it expects to add China’s A-shares to their MSCI Emerging Markets Index sometime later. The MSCI decision might be a good thing for the China A-share market, as the stocks listed on the Shanghai and Shenzhen exchanges are trading in bubble territory. The news sent the SET up 1.23% to an intra-day high of 1510.68 before pulling back to close at 1,504.04. 

The Bank of Thailand (BOT) monetary committee met on Wednesday and decided not to make any policy changes, meaning the benchmark rate stays at 1.5%. In the BOT statement, it said “Economic momentum in the first four months of 2015 softened due to sluggish private consumption and continued contraction in exports, … Nevertheless, increased disbursement of public investment expenditure and continued improvement in tourism helped shore up the economy.”.

European stocks rallied on Thursday on renewed hopes Greece and its lenders will reach a deal to unlock more bailout funds to avoid a default. The SET tagged along with the European markets and jumped 0.95% to an intra-day high of 1,518.34, the 50-day SMA, before pulling back to close at 1,514.81. 

The global stock markets, including the SET, sold off on Friday as the International Monetary Fund (IMF) delegation left negotiations in Brussels late Thursday and flew home because of major differences with Athens. One of the differences was a long list of new demands from Greece, including funds from the European Stability Mechanism, to repay about 6.7 billion euros of bonds held by the ECB that come due in July and August.

The European Union is now telling Greek Prime Minister Alexis Tsipras to stop gambling. With all these new demands from Greece, the tensions are also rising in Berlin with a growing number of German lawmakers committed to voting against a third bailout for Athens. 

The USD/THB exchange rate closed on Friday at 33.63 baht per dollar, down 0.83% for the week. The 10-year Thailand Government bond yield was unchanged for the week and closed at 3.11% on Friday. In the past several weeks, the yield spread between the U.S. 10-Year Treasury, yielding at 2.39%, and the Thailand 10-Year Government bond seems to be pegged between 0.7% and 0.72%. The SET managed to close at 1,508.23 on Friday, up just 0.86 points for the week.

From our technical viewpoint, the SET broke out of the falling wedge this week, driven by the headline news that the MSCI will include China’s A-shares in the MSCI Emerging Markets Index sometime later. Nonetheless, the index failed to break through the 100-day SMA at 1,518.92 and made a pullback on Friday, as the Greece debt negotiations seemed to fall apart and next week’s U.S. Federal Reserve meeting looms. 

Although the SET symmetrical chart pattern appears to be intact, the concern is that the SET is also moving in a bearish lower high (L-H) chart pattern since it peaked in February, meaning every high is lower than the previous high while every low is lower than the previous low. This lower high chart pattern signals a bearish downtrend, unless the SET is able to close above the H3 level, or 1,536.30. 

The SET head resistances are the 100-day SMA at 1,518.92, 38.2% Fibonacci retracement at 1,526.66, and the trendline resistance at the 1,530 level. In the case of a pullback, there are supports at 1,497.88, or 50% Fibonacci retracement, the trendline supports at the 1,492 and 1,482 levels. Again, all bets are off if the SET drops below 1,469.11, or 61.8% Fibonacci retracement.

The headline risk when the SET opens on Monday is the Greece debt drama. It seems like the negotiations between Greece, the ECB and IMF creditors are falling apart as the Greece government is acting irresponsible with new demands while holding the global financial markets hostage. The second headline risk is the two-day U.S. Federal Reserve meeting on Tuesday and Wednesday. With all the Greek drama and the wobbling U.S. economy, no one expects the Fed to increase the benchmark U.S. interest rate at this meeting. 

Next week also has quadruple-witching options expiration in the U.S. equity markets where four types of standardized contracts, including stock options, stock index options, stock index futures, and single stock futures, all expire on Friday after the market close. It is typically very volatile, especially when the liquidity is low.