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The SET closed down 1.5% for the week at 1,394.94 on Friday after the U.S. Federal Reserve decided to keep rates on hold after Wednesday's Federal Open Market Committee
(FOMC) meeting. The Fed issued a somewhat hawkish policy statement, hinting of a rate hike at the next FOMC meeting on December 15-16. From the statement, the Fed seems to be determined to hike the rate this year even though they admit that the pace of job gains has 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%.
The SET didn’t respond well at all to European Central Bank (ECB) President Draghi’s dovish remarks and the People's Bank of China
(PBoC) rate cut announcement a week earlier. Thai institutional and foreign investors, as well as proprietary traders, ran to the exits, while individual investors were buying. It remains to be seen next week 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 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 30.
Don’t place a big bet on a December Fed rate hike yet, as the U.S. economy is starting to show signs of trouble. 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.
On Friday, the Department of Commerce said that personal spending rose just 0.1% in September from a month earlier, the slowest pace since January, missing The Wall Street Journal’s forecast of 0.2% growth. If the U.S. holiday shopping season stalls, the U.S. will have a recession next year. And that will be the Fed's Janet Yellen's second mistake that ended up with a recession.
The spread between the 2-year and 10-year U.S Treasury yield fell on Thursday 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 Bank of Thailand (BOT) will have their monetary policy committee meeting on Wednesday, November 3. The BOT appears to not be in a hurry to cut interest rates further, and wants to keep its benchmark rate at 1.5%. In its latest policy statement, the BOT affirmed its stance as sufficiently accommodative, especially if the THB generally remains weak. Since the last BOT meeting on October 2, the Thai baht has appreciated over 2.47% against the U.S. dollar, to close at 35.6 baht per dollar on Friday.
In fact, a weak baht seems not to have much impact on the Thai exports as the Commerce Ministry of Thailand said on Monday that Thailand's exports in September fell 5.51% from a year earlier, less than expectations of a 7.65% decline, but still it is the ninth straight monthly drop. Imports plunged 26.2%, the biggest fall since August 2009, missing the Reuters poll forecast of a 19.1% drop.
From our short-term technical viewpoint, the SET has been moving in an ascending (ASC) wedge chart pattern since the end of August and was unable to break out the 100-day SMA (blue line) head resistance. The index fell back to the lower trendline support of a symmetrical triangle (SYM TRI) chart pattern and the inverted hammer candlestick has now emerged in the chart pattern, signaling a possible bullish trend reversal.
The SET could bounce off the trendline support as 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. There are technical support levels at 1,375.99 and 1,369.31, or 23.6% Fibonacci retracement, if the SET pulls back further.
Note that the 50-day SMA (green line) is now running into the trendline support, while the 100-day SMA is the trendline resistance. This suggests that more firms and individual traders use algorithmic trading strategies as tools for making transaction decisions. |
