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%).
Author: Midhun Parameswaran
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 1.09% on slightly lower and below-average volume this week. The market remains in a Confirmed Uptrend with six distribution days. The index was trading around its 100-DMA this week and breached below its 100-DMA and the rising 21-DMA (~5,250, +0.5%) on much higher volume Friday. Next support is at the 50-DMA (~5,140, -1.6%) and next resistance is at May highs of ~5,380 (+3%). May PPI rose 9.0%, hitting a 13-year high and beating consensus. CPI rose 1.3%, missing expectations of 1.6% but higher than April’s 0.9%. Social financing was RMB 1.92T, missing consensus of RMB 2.11T but higher than April. Incremental loans were RMB 1.50T while M2 rose 8.3% y/y, both beating consensus and April. Exports (US$) rose 27.9% y/y, missing expectations, but imports (US$) rose 51.5%, beating both expectations and April. Computer software rebounded and led the market as domestic-made software is expected to benefit from Huawei’s Harmony OS. The automobile sector gained, boosted by EV assembly companies. EV batteries and solar power stocks showed very strong momentum. The agriculture sector declined and lagged the market, mainly due to decreasing pork prices. Baijiu stocks retreated strongly after the recent rally. We advise investors to stay disciplined as the index is breaking below key support. Be selective in adding risk and focus on quality stocks breaking out of solid bases. Avoid chasing highs amid the volatile market. The China A-shares market will be closed Monday due to the Dragon Boat Festival.
US Focus
The U.S. market has shifted back to Confirmed Uptrend. The S&P 500 is again trading at all-time highs, while the Nasdaq is trading within 1% of all-time resistance at 14,211. Near-term support remains the rising 21- and 50-DMA, respectively. The distribution day count stands at six and three, respectively, with two expiring on the S&P 500 and one on the Nasdaq next week. Each index has only added one distribution day in the last three weeks
European Focus
On Thursday, the Stoxx 600 ended 0.44% above last Friday’s close. Of the 17 indices we cover, 14 are in a Confirmed Uptrend and three in an Uptrend Under Pressure. This week, we upgraded the Netherlands to a Confirmed Uptrend after it reclaimed its prior rally high.
Global Focus Developed
Australia’s ASX All Ordinaries Index gained 0.4% this week. The index closed at a new 52-week high with immediate support along its 21-DMA (-2.5%). 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 fell 1.09% on slightly lower and below-average volume this week. The market remains in a Confirmed Uptrend with six distribution days. The index was trading around its 100-DMA this week and breached below its 100-DMA and the rising 21-DMA (~5,250, +0.5%) on much higher volume Friday. Next support is at the 50-DMA (~5,140, -1.6%) and next resistance is at May highs of ~5,380 (+3%).
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 0.73% on lower and below-average volume this week. The market remains in a Confirmed Uptrend with six distribution days. The index managed to trade above its 100-DMA (~5,260, -0.4%). Next support is at the 21-DMA (~5,190, -1.75%). The index will face strong resistance as it attempts to test all-time highs of 5,930 (+12%) in February. May’s official manufacturing PMI was 51.0, slightly lower than expectations and April’s reading. The Caixin Manufacturing PMI rose to 52.0 in May, up from 51.9 to the highest level since December, in line with expectations. May’s Caixin Service PMI was 55.1, lower than April’s reading. Chemical stocks led the market due to strong demand for EV batteries. Coal stocks rallied. Communication services also outperformed as 5G is expected to be fully commercialized in 2021. Small- and mid-cap baijiu stocks rallied. Financial and Real Estate lagged. We would like to see the CSI 300 hold above its 100-DMA to be constructive. We recommend a gradual approach to accumulating positions in quality stocks breaking out of solid bases. Avoid chasing highs in the volatile market.
US Focus
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq traded at the low end of a relatively tight range this week before pushing back to the upper end of that range Friday. We will shift the market back to Confirmed Uptrend should the S&P 500 clear back above all-time high resistance at 4,238 next week. Near-term support remains the 21- and 50-DMA, respectively. The distribution day count stands at seven and four, respectively, with one day expiring on each next week.
