The Thailand SET continued selling right of the gate on Wednesday, lead by the banking sector, as the index failed to bounce off the 1,519.47 technical support level. Stocks took another 1.42% nose dive on Thursday, maybe in part due to Thailand's consumer-confidence data, released by the University of the Thai Chamber of Commerce, showing their index sank to a 10-month low of 76.6 in April. A mixed bag of weak economic data from the U.S. and China weighed on Thai market sentiment.

It was not particularly helpful to the global equity markets that Federal Reserve Chair Janet Yellen told IMF Managing Director Christine Lagarde on Wednesday that, “I would highlight that equity market valuations at this point generally are quite high,”. 

Mr. Gary Stern, former president of the Minneapolis Fed, quickly responded to Ms. Yellen’s comment in an interview that, “Talk by itself isn’t going to turn out to be effective, … Raise interest rates, … That would be a clear way to follow through, ”. In short, it is cheap talk without follow-up.

The Thailand SET managed to bounce off the technical trendline support on Friday to close at 1,510.51, down 1.06% for the short-trading week.

The U.S. Commerce Department said on Tuesday that the U.S. trade deficit jumped 43.1% to U.S. $51.4 billion in March, the largest since October 2008, as imports snapped back after business at U.S. West Coast ports returned to normal. Economists had forecast the trade deficit rising to only U.S. $41.2 billion. 

Most economists believe that an increase in the trade gap is enough to knock 0.15% off GDP at an annual rate, meaning a downward revision and a potential contraction in the first-quarter GDP. This could be spell trouble for the second-quarter GDP, as some of the imported consumer and capital goods likely ended up as inventories, which are already at record levels since the third-quarter of 2010. 

China’s Customs Administration said on Friday that overseas shipments fell 6.2% from a year earlier in yuan value, compared with the median estimate for a 0.9% rise in a Bloomberg survey of analysts. Imports tanked 16.1%, the fourth straight double-digit decline, leaving a trade surplus of 210.21 billion yuan or about U.S. $33.9 billion. Chinese exports to the U.S. rose 9.2% in the January to April period in yuan terms, exports to the EU dropped 0.7% and shipments to Japan tumbled 12%, according to China’s Customs Administration. 

Two weeks ago, the Shanghai Containerized Freight Index (SCFI), which tracks shipping rates from Shanghai to the world, fell off a cliff, down a breathtaking 67% from a year ago. There is potential for further slowdown in Chinese exports as U.S. inventories of imported consumer and capital goods are already at record levels, according to U.S. trade data released on Wednesday. 

The USD/THB exchange rate surged 1.61% from last week to close at 33.55 baht per dollar, while the 10-year Thailand Government bond yield tumbled 17.89% to close at 2.9% on Friday. It should not come as a surprise as major government debt markets including Germany, the U.S. and the U.K. have seen also a dramatic sell-off, sparking stark jumps in bond yields.

From our technical viewpoint, the Thailand SET just bounced off the trendline support and a bullish falling wedge has now emerged. One should be aware that a bearish inverted cup-and-handle has also emerged. A trend reversal could take the Thailand SET back to above the 1,510 level. If the negative sentiment persists, the Thailand SET could continue to pull back. There are technical supports at 1,497.88, or 50% Fibonacci retracement level, at 1,484.91, and at 1,469.11, or the 61.8% Fibonacci retracement level. 

If the Thailand SET can’t bounce from any of these key supports, the projected price is between 1,376 and 1,360, determined by adding the depth of the cup pattern to the rim of the cup at 1,484.91.

The U.S. Department of Labor said on Friday that employers added 223,000 jobs in April, slightly lower than expectations. The unemployment rate is down to 5.4% from 5.5%. The surprise is the big revision to 85,000 jobs in March, down from the original 126,000 previously reported. 

The U.S. non-farm payrolls report on Friday looks decent, but not anything to write home about as the labor force participation rate increased just 0.1% to 62.8% last month. That means over 93 million Americans, aged 16 and older, still do not have a job or gave up looking for one in April.

More investors see the first Fed rate hike to be either in September 2015, or in 2016, which ignited the U.S. equity rally on Friday. Emerging markets, including the Thailand SET, may get a tailwind from this when they open on Monday.

Related Ticker: iShares MSCI Thailand Capped ETF [NYSEARCA:THD]