US indices continued to build on recent gains: Russell 2000, USD/SGD, Brent crude

Market Recap

Major US indices continued to build on recent gains overnight, as an initial dip lower was met with some recovery into the latter half of the session. Earnings from Goldman Sachs yesterday joined the Bank of America in delivering both a top and bottom-line beat. Robust bond trading results have more than offset the plunge in investment banking revenue. While third-quarter earnings were still down 44% from a year ago, a smaller-than-expected decline is what markets are tapping on, once again reinforcing that downbeat market expectations heading into the earnings season creates a lower hurdle of outperformance. Thus far, the major US banks’ earnings have been well-received overall, with the KBW Bank Index rising more than 8% from last week.

US Treasury yields were slightly lower, with the 10-year yields still defending its 4% level but the earnings picture clearly dominates market sentiments. The extended-trading session was met with another 14% surge in Netflix's share price, with the 2.41 million addition of subscribers far towering above the previous 1 million guided. The worst-is-over stance was highlighted as well, with another 4.5 million subscriptions predicted for the current quarter, along with the management’s guidance to be ‘on a path to reaccelerate growth’. A lower-priced advertising-supported version will be the growth catalyst on watch. Tesla's earnings will be on up ahead today after US market closes.

Recent upside has brought the Russell 2000 index back to retest a key resistance at the 1,770 level, which seems to mark the neckline of a recent double-bottom formation in coincidence with its 50-day moving average (MA). Some selling has been seen at this level, with a bearish shooting star presented on its four-hour chart while dip buyers tried to hold up with a short-lived retracement. Any break above this level could leave the 1,910 level on watch next based on the double-bottom projection.

Asia Open

Asian stocks look set for a slightly positive open, with Nikkei +0.51%, ASX +0.32% and KOSPI +0.41% at the time of writing. The quiet economic calendar in the region today will leave the Asia session to digest the after-market Netflix results, with growth-sensitive indices such as Nikkei and KOSPI potentially finding greater traction from the outperformance in Nasdaq futures (+1.27%) this morning. On the flipside, the lack of positive surprises from China’s National Congress continues to keep Chinese equities in check, with the Nasdaq Golden Dragon China Index just barely rising by 0.3% overnight. Dip-buying has been seen in the lead-up to the National Congress, but thus far, the absence of a positive catalyst seems to be the story with the largely status-quo positioning from the authorities.

On another note, after a short-lived rebound, the USD/SGD is back to retest a double-top formation neckline at the 1.420 level. A weaker US dollar, along with the persistence in inflationary pressures presented in the recent Monetary Authority of Singapore (MAS) guidance, continues to serve as headwinds for the pair to digest. Any breakdown below the 1.420 level could potentially open the door to the 1.407 level next, where a key 61.8% Fibonacci retracement level stands.

On the watchlist: Brent crude prices failed to find upside despite risk-on mood

Despite the improved risk environment and a lower US dollar, brent crude prices remain down close to 7% from last week, trading back below a key resistance at the US$92.50 level. Prices currently faced a double whammy on both the demand and supply front, brought on by a firm reiteration of the zero-Covid policies by China authorities, along with US plans to release more oil from its strategic reserves heading into next month’s congressional election. As for now, a descending channel pattern remains intact, with the cautious mood to linger until greater clarity is attained from the US plans. Near-term support may be at the US$85.00 level, but the overall downward bias could seem to remain until the channel pattern is overcome.

Tuesday: DJIA +1.12%; S&P 500 +1.14%; Nasdaq +0.90%, DAX +0.92%, FTSE +0.24%