The CSI 300 dropped 1.7% for the week on decreased volume. We moved mainland China markets to an Uptrend Under Pressure after the market closed last Friday following a fourday losing streak and the addition of two distribution days. We reiterate our pessimism on mainland China’s market and we believe that there is a high probability that the August 27 follow-through day, which was undercut last Friday, will fail. The index is 3.5% below its 50- DMA and 16.8% below its 200-DMA. It is 2.1% above its previous low of ~3,209. On the trade war front, the U.S. could push ahead with tariffs on $200B of Chinese imports. With increasing volatility, we recommend staying patient and cautious.
Author: Raghavendra K
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq pulled back off highs during the first week of September and continues to digest strong gains from August. Increasing distribution has caused the Nasdaq to break slightly below its 21-DMA, while the S&P500 is testing this moving average. The rising 50-DMA is the next level of support for both indices. The majority of growth ideas have pull back off highs and/or are consolidating above key support levels. Despite the rise in distribution, leadership remains intact. We maintain a bullish outlook as long as indices and leading stocks exhibit constructive price action and hold above key support levels.
European Focus Long
The Stoxx 600 closed 2.4% lower on a weekly basis as of Thursday. We changed the market to a Downtrend yesterday, as the ten-week Rally Attempt failed when the index closed below its first-day low of 374.38. The index continued to fall today in intraday trading. Technology stocks were the worst performers, affected by a report from Goldman Sachs that the memory chip sector’s “super cycle” is close to peaking and also the investigation into tech giants like Twitter and Facebook by the U.S.
Global Focus Developed Long
Australia’s ASX All Ordinaries Index plunged 2.73% this week. It added two distribution days, taking its total to six. The index was moved from a Confirmed Uptrend to Under Pressure.
Global Focus Emerging Long
China’s CSI 300 index dropped 1.71% after two consecutive weeks of gains. The index remains in an Uptrend Under Pressure and we recommend remaining cautious on new additions. Due to renewed trade war fears, the index faces stiff resistance at the 50-DMA.
Global Focus Frontier
Saudi Arabian Mining Company (
) is one of the leading mining and metals companies in the Kingdom of Saudi Arabia. The Company’s key catalysts include production expansion of aluminium and phosphate and rising commodity prices.
China A Shares Long
The CSI 300 rose 0.28% for the week on increased but still-below-average volume. We upgraded the market to a Confirmed Uptrend after it had a follow-through day Monday. However, the index had a four-day losing streak after the follow-through day, and both the Shanghai Composite and Shenzhen Composite Index declined for the week. Our conviction remains low as the CSI 300 remains below 50-DMA resistance, which has been consistent. The market is still bearish and the index is still 15.8% below its 200-DMA and 2.3% below its 50-DMA. We anticipate that volatility will continue in the near term, especially as China- U.S. trade tensions have risen. We recommend taking a defensive approach and waiting for additional signs of strength before being aggressive.
US Focus Long
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating near all-time highs after accelerating the last two weeks. Distribution remains low with three days on the Nasdaq and two on the S&P 500. Leadership remains intact, with strong price action across multiple groups, including payment processors, med-tech, and software. We maintain a positive outlook on the market.
European Focus Long
As of Thursday’s close, the Stoxx 600 was up 0.47% on a weeklybasis, but it reversed this gain on Friday, when index lost 0.49% intraday. The index continues to hold above its 200-DMA and remains in a Rally Attempt. It has recovered from an August 15 low but we ahve little faith in the rebound. This is largely reflected in the historically low number of stocks on our European Focus List.Over the past month,we added only three stocks to our Focus List
Global Focus Developed Long
Australia’s ASX All Ordinaries Index rose 10% this week. It added one distribution day during the week, taking its total to five. The index is currently in a Confirmed Uptrend.
