The CSI 300 rose 2.69% on higher but below average volume this week. The market remains in an Uptrend Under Pressure with the number of distribution days decreasing to four. The index retook the 50-DMA (~5,150, -1.7%) and converging 21-DMA and 100-DMA (~5,220, -0.4%), with the next support at the 200-DMA (5,076, -3.1%). Resistance lies at May’s high of ~5,380 (+2.7%). Cyclical sectors such as steel, chemical, and non-ferrous metals closed with good gains on expected strong semi-annual financial results. Solar power stocks led the gains as the government encouraged rooftop photovoltaic power. Computer software fell due to the retreat of Huawei Harmony OS related stocks. Consumer Staple underperformed due to the retreat of baijiu stocks. The market was active as A-share turnover has been greater than RMB 1T for six consecutive sessions. Our conviction increases as the index retook its key moving average lines on higher volume, but we still advise investors to stay selective and focus on quality stocks breaking out of solid bases. Avoid chasing highs as sector rotation has been quick.
Author: Midhun Parameswaran
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 shook out briefly below its 50-DMA last week only to push right back into new all-time highs this week. The Nasdaq, which has been leading over the last few weeks, broke out from a 19-week consolidation into new alltime highs. We continue to view the rising 21-DMA to be a key level of near-term support. The distribution day count has declined to a reasonable three and four days, respectively, with one additional day set to expire on the S&P 500 next week.
European Focus
On Thursday, the Stoxx 600 ended 1.10% above last Friday’s close. Of the 17 indices we cover, 12 are in a Confirmed Uptrend and five in an Uptrend Under Pressure. This week, we upgraded Ireland to a Confirmed Uptrend after it reclaimed its prior high and downgraded the U.K., Spain, and Sweden to an Uptrend Under Pressure after they breached their 50-DMA.
Global Focus Developed
Australia’s ASX All Ordinaries Index declined 0.6% this week. The index is testing support along its 21-DMA and is trading close to its 52- week high. It is in a Confirmed Uptrend with four distribution days after adding one distribution day this week. One distribution day will expire next week
Global Focus Emerging
The CSI 300 rose 2.69% on higher but below average volume this week. The market remains in an Uptrend Under Pressure with the number of distribution days decreasing to four. The index retook the 50-DMA (~5,150, -1.7%) and converging 21-DMA and 100-DMA (~5,220, -0.4%), with the next support at the 200-DMA (5,076, -3.1%). Resistance lies at May’s high of ~5,380 (+2.7%).
Global Focus Frontier
Ho Chi Minh City Development Joint Stock Commercial Bank (HD Bank) is one of the top banks in Vietnam and is a constituent of the VN30 Index. Its industry-leading growth and key financial ratios, along with its exposure to the consumer finance industry, will drive its growth.
China A Shares
The CSI 300 fell 2.34% on lower and below average volume this week. The market was shifted to an Uptrend Under Pressure Wednesday with the number of distribution days decreasing to five. The index breached below the 50-DMA (5,140, +0.7%) on much higher volume, with immediate support at its 200-DMA (~5,060, -0.8%). Resistance lies at the converging 21-DMA and 100-DMA (~5,240, 2.7%) followed by May’s high at ~5,380 (+5.4%). Social retail sales in May, fixed asset investment from January-May, and industrial value added in May rose 12.4% y/y, 15.4% y/y, and 8.8% y/y, respectively. All three readings slowed from April, with the former two weaker than consensus. Electronics led the gains as chip shortages led to price increases. Automobiles surged, boosted by Huawei’s investment in intelligence driving. Energy and agriculture stocks declined sharply. We advise investors to stay cautious and disciplined following recent signs of weakness after the index broke below several levels of support. Be selective when adding risk and focus on quality stocks breaking out of solid bases. Avoid chasing highs in the volatile market.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 pulled back to close slightly below its 50-DMA as market breadth narrowed, while the Nasdaq traded relatively flat for the week, holding just below all-time high resistance of 14,211. Price support below the 50-DMA on the S&P 500 is 4,056, which may coincide with a rising 100-DMA. The distribution day count stands at six and five, respectively, with three expiring on the S&P 500 and one on the Nasdaq next week.
European Focus
On Thursday, the Stoxx 600 closed 0.40% above last Friday’s close. We shifted Germany, Finland, and Norway to a Confirmed Uptrend after the indices reclaimed their prior highs. Of the 17 indices we cover, 13 are in a Confirmed Uptrend, including all the major indices – the U.K., France, Germany, and the Stoxx 600 – and the remaining four are in an Uptrend Under Pressure.
Global Focus Developed
Australia’s ASX All Ordinaries Index gained 0.6% this week. The index closed at a new 52-week high with immediate support along its 21-DMA (-2%). It is in a Confirmed Uptrend with four distribution days after adding one distribution day this week. One distribution day will expire next week.
