Author: Midhun Parameswaran

The CSI 300 dropped 1.98% on higher but above average volume this week and remained in an Uptrend Under Pressure, with the distribution day count rising to six. The index continued to trend lower and breached the November 2021 low of ~4,754 (+0.6%). Next immediate support lies at the July 2021 low of 4,664 (-1.3%). The Tech-heavy ChiNext index recovered 0.7% but was still below its 200-DMA resistance. Disappointing December financing data released this week weighed on the market sentiment. Moreover, December inflation data indicated CPI was still missing consensus while PPI growth slowed down. The resurgence of COVID-19 cases also dampened investors’ risk appetite. Therefore, COVID-19 testing shares surged this week, and the health care sector outperformed. The market was still volatile with strong sector rotation. Wait-and-see sentiment is observed without major catalysts before Chinese New Year as investors wait for further rate cuts to boost the economic growth. We can see there was still strong selling pressure. Stay cautious due to concerns about clustering distribution days. We recommend that investors adopt a defensive approach and pick up stocks with high relative strength. Avoid chasing highs

The CSI 300 dropped 2.39% on higher but below average volume in 2022’s first trading week and remained in an Uptrend Under Pressure with the distribution day count rising to five. The index breached converging 50- and 100-DMA support with the next immediate short-term support at November 10’s low of ~4,754 (-1.4%). The Tech-heavy ChiNext index slumped 6.8% and lost its 200-DMA support as the U.S. Fed indicated faster-than-expected rate hikes and balance sheet reductions. Leading green energy and EV stocks dragged the market down. However, rising hopes on more easing policies to stabilize the economic growth lent support to the market. Long-term lagging stocks related to property development, infrastructure construction, building materials, engineering machinery and home appliance recovered substantially. Sector rotation was still strong in the volatile market. Wait-and-see sentiment is observed without major catalysts before the Chinese New Year. We would like to stay cautious due to concerns about clustering distribution days. We recommend investors adopt a defensive approach and pick up stocks with high relative strength. Avoid chasing highs.