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S&P/ASX 200 Fundamental Analysis – August 29, 2016 – Forecast

By:
James Hyerczyk
Updated: Aug 29, 2016, 01:29 UTC

A weaker close on Wall Street on Thursday drove the S&P/ASX 200 lower on Friday with few investors willing to step in front of the market ahead of

S&P ASX 200 Index

A weaker close on Wall Street on Thursday drove the S&P/ASX 200 lower on Friday with few investors willing to step in front of the market ahead of Friday’s key speech by Fed Chair Janet Yellen. The index closed at 5515.50, down 25.50 points or 0.48 percent. For the week, the index lost 11 points.

Besides the reaction to the lower U.S. indices, weakness in the major banks tied to a decline in the REITS sector also weighed on prices. The best performing group for the session was the telecoms.

U.S. stock indices were mixed on Friday as investors evaluated the comments from Fed chair Janet Yellen and Vice Chairman Stanley Fischer. The indices posted a volatile two-sided trade as investors tried to figure out if the tone of her comments was hawkish or dovish.

Yellen essentially said the economy had strengthened and suggested a rate hike was still data dependent. Most traders concluded that she offered nothing new and that a rate hike was not imminent.

The biggest reaction by the markets and the one that triggered the sell-off in the equity markets were made by Fischer. He said two rate hikes were possible. The U.S. Dow Jones Industrial Average contract close about 50 points lower. The benchmark S&P 500 about 0.15 percent lower and the NASDAQ composite finished at 0.13 percent higher.

S&P/ASX 200 Index
Daily S&P ASX 200 Index

 

Given the negative zone at the close, investors have to expect a lower opening by the S&P/ASX 200 on Monday. The week is filled with several key reports from Australia and the U.S. with the major report the U.S. Non-Farm Payrolls.

Traders are looking for the report to show the economy added 186K jobs in August. Unemployment is expected to decline slightly to 4.8%. Average hourly earnings are expected to show a drop from 0.3% to 0.2%. A blockbuster number may give the Fed the fire power to raise rates twice before the end of the year. Meeting the estimate or coming in below the estimate will likely take a September rate hike off the board.

In Australia, investors will get the opportunity to react to the latest data on Building Approvals on Tuesday, and a speech from RBA Assistant Governor Debelle on Wednesday. The week comes to an end with an Australian Private Capital Expenditure report and Retail Sales on Thursday.

Look for a lower trade today as Australian investors are expected to react negatively to the comments from Yellen and Fischer.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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