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The SET tumbled another 1.36% on Thursday to close at 1,390.04, after the Fed kept rates on hold, but is somewhat hawkish, meaning there are hints of a rate hike at the next FOMC meeting on December 15-16. The Fed seems to be determined to hike the rate this year, even though they admit in their statement that the pace of job gains had slowed. The U.S. nonfarm payrolls report for October will be released by the Labor Department next Friday, November 6. Wall Street economists' expectations are for a 177,000 gain in payrolls with the unemployment rate remaining at 5.1%.
Thai institutional and foreign investors for the SET ran to the exits, while individual investors were buying. It remains to be seen whether it was end-of-the-month technical selling by professional fund managers or a sky-is-falling-Chicken-Little scenario, meaning that there were fears of a Fed rate hike. The reaction in the U.S. financial markets was somewhat different though, as the S&P 500 ran up 1.18% after the release of the Fed statement and the 10-year U.S. Treasury yield surged 2.44%.
The spread between the 2-year and 10-year U.S Treasury yield fell to 1.37 basis points, the lowest in six months. Falling spreads may indicate worsening economic conditions in the future, resulting in a flattening yield curve. A very low or negative spread could signal an upcoming recession.
The Bureau of Economic Analysis (BEA), the U.S. Department of Commerce, said on Thursday that the advance estimate U.S. gross domestic product (GDP) increased at an annual rate of 1.5% in the third quarter of 2015, missing the 1.6% median projection in a Bloomberg survey of 80 economists. Let's wait and see if the Fed is making a mistake or not. If the U.S. holiday shopping season stalls, the U.S. will have a recession next year. And that will be Yellen's second mistake that ended up with a recession.
The federal funds futures, traded on the Chicago Mercantile Exchange and commonly used to estimate the market’s views on the likelihood of changes in U.S. monetary policy, indicate 53.5% odds for a quarter-point rate hike at the December 16 policy meeting, according to data from the CME Group as of October 29.
From our short-term technical viewpoint, the SET was unable to break out the 100-day SMA (blue line) and fell back to the lower trendline support of an ascending (ASC) wedge. A bullish higher low (H-L) chart pattern, meaning every low is higher than the previous low while every high is higher than the previous high, is still intact as long as the SET closes above 1,341.30. Let’s see if the SET can bounce off the 50-day SMA (green line), which now runs into the trendline support.
The Bank of Japan (BOJ) will meet on Friday. Japan's September retail sales are in the tank so Japan will probably head back into recession unless the BOJ rolls out more stimulus. Don’t hold your breath!
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