The CSI 300 declined 4.2% for the week on increased volume. This is the fourth consecutive down week without a follow-through day. The index has dropped 11.5% since June 1 and tested one-and-a-half-year lows of January 16, 2017. The next possible support level would be ~3,000. We consider Friday the first day of the CSI 300’s Rally Attempt, given its upside reversal. The market could be oversold, but we recommend a patient approach until the next follow-through day. Regardless of the negative market environment, our China A-Shares Focus List outperformed the index with a decline of only 3%. We will keep an eye on outliers and defensive names from the Consumer Staples, Retail, Utility, and Health Care sectors if the market continues to recover next week.
Author: Raghavendra K
US Focus Long
The U.S. market is in an Uptrend Under Pressure. We are encouraged by strong price action and the decline in distribution this week, but would like to see confirmation next week with bigger volume before we move the market back into a Confirmed Uptrend. Distribution now stands at four days on the S&P 500 and five on the Nasdaq, with one day set to expire on the Nasdaq next Thursday. We are also encouraged by the action of leading ideas over the last few sessions. Though the majority of leadership continues to consolidate, multiple ideas have been able to hold and move higher off short-term levels of support over the past week. Our recommendation will be to buy high relative strength ideas at ideal pivot points should we see the major averages hold these gains early next week and move higher on more convincing volume.
European Focus Long
This week through Thursday, the Stoxx 600 was up 0.44%.
Following Monday’s 0.84% decline, the index gained the next three
trading sessions. As the market closed Thursday, the index was just
0.47% below its 200-DMA. We upgraded the Stoxx 600 to a Rally
Attempt last Friday and this week, four other European indices
followed suit: France, Germany, Belgium, and Luxembourg. With
these changes, 17 indices (including the Stoxx 600) are now in a
Rally Attempt. We added one name and removed two from our
European Focus List this week, bringing the number of stocks on
the list down to 29.
Global Focus Developed Long
Australia’s ASX All Ordinaries Index increased 1.05% this week. It added one distribution day during the week, bringing the total to three over the last five weeks, and remains in a Confirmed Uptrend. The index is trading 1% off 52-week highs.
Global Focus Emerging Long
China’s CSI 300 Index (
) slumped 4.15% over last week. The market remains in a Downtrend. The index is trading 24% off its 52-week high. We view stiff resistance at the 200-DMA (~3,948). We recommend a conservative approach for any fresh additions.
Global Focus Frontier Long
Grupo Financiero Galicia (
) is a leading private sector Argentine bank, in terms of its deposits and loan portfolio. Leveraging its leadership and branch expansion, it continues to beneft from a growing loan book.
China A Shares Long
China’s market is in a Downtrend. The CSI 300 slumped 3.9% for the week, the worst weekly loss since February 9. The index gapped down and hit a one-year low of 3,542.46. We downgraded the market to a Downtrend on Tuesday, when the index dropped 3.5% on volume 90% higher than average. The CSI 300 also broke through a previous low of ~3,700 on April 18. The next level of support would be around 3,500 and, if that level is broken, the index could go lower to find support at 3,300, the lowest level after the 2016 market crash. Despite the market shifting more bearish, we continue to see relative outperformance in outliers and defensive names. We are keeping an eye on Consumer Staples, Retail, Utility, and Healthcare.
US Focus Long
The U.S. market remains in a Confirmed Uptrend. The S&P 500 is holding support at 2743, while the Nasdaq remains just 1% off all-time highs. Distribution is elevated, however one day did expire at the close Friday to take the count back down to six on the S&P 500. Another distribution day is also set to expire at the close Tuesday. Leadership is mixed with the majority still holding up well. Software ideas, however, did take a hit this week, pulling back off extended levels and likely set to consolidate gains over the next several weeks. Going forward, we will be looking for the market to avoid further distribution and for the of majority leading ideas to continue holding above short-term levels of support.
European Focus Long
The Stoxx 600 was downgraded to a Confirmed Downtrend this week. As of Thursday’s close, the index was down 2.13% on a weekly basis, compared with a gain of 1.04% the prior week. The index is 0.80% below its 200-DMA and 1.92% below its 50- DMA. There were several status downgrades across Europe. We moved France, Germany, Switzerland, Austria, and Belgium to a Confirmed Downtrend. We also moved the U.K., the Netherlands, Finland, and Luxembourg to Under Pressure. Out of the 16 European indices, six are in a Confirmed Downtrend and four are in an Uptrend Under Pressure.
Global Focus Developed Long
Australia’s ASX All Ordinaries Index increased 1.88% this week. It is trading 4.44% above its 40-WMA and is currently in a Confirmed Uptrend.
