March 04, 2022 – Week In Review Mid Cap
Author: Saminathan Jaganathan
March 04, 2022 – Week In Review Large Cap
March 04, 2022 – Week In Review Large Cap
China A Shares
The CSI 300 posted a modest gain of 0.35% in the four-trading-session week. The market remained in an Uptrend Under Pressure with six distribution days. The index tested resistance at its 21- (~4,890, +0.5%) with the next support at July 28’s low (~4,664, -4.2%). January-August industrial profit increased 49.5% y/y, slowing from 57.3%. September’s official manufacturing PMI fell from 50.1 to 49.6 (consensus 49.8), the first contraction reading since March 2020, though non-manufacturing PMI rose to 53.2 from 47.5 on improving service industries following eased COVID conditions. Holiday spending-related food & beverage and agricultural stocks led the gains, rallying after months of trending downward. The recent crunch drove power stocks higher, but power-shortage- vulnerable steel, non-ferrous, and chemical companies retreated further on production worries and profit-taking pressures. Building materials remained weak, though developers and banks’ selloff provided some relief. Trading volume was light with a cautious mood ahead of the seven-day National Day holiday. Q3 earnings will start rolling in after the holiday. We recommend investors stay patient and see if any clearer signals arrive then. Keep an eye on overseas market performance and watch geopolitical issues and domestic policies during the long market close. The market will re-open on Friday, October 8.
US Focus
The U.S. market remains in an Uptrend Under Pressure. The S&P 500 and Nasdaq gapped down back below their respective 50-DMA Tuesday and are now trading around their respective 100- DMA after staging upside reversals Friday. Both will now enter their fifth week of consolidation with support at ~4,200 and 14,200, respectively, and resistance at a flattening 50-DMA (S&P 500: 4,443; Nasdaq: 14,909). The distribution day count increased sharply to five and seven, respectively, with no expiration next week.
European Focus
On Thursday, the Stoxx 600 ended 2% below last Friday’s close. Of the 17 indices we cover, one is in a Confirmed Uptrend and 16 in an Uptrend Under Pressure. This week, we upgraded Austria to a Confirmed Uptrend after it reclaimed its rally high and downgraded Ireland and the Netherlands to an Uptrend Under Pressure after the indexes breached their 50-DMA.
Global Focus Developed
Australia’s ASX All Ordinaries Index declined 2.1% this week. We moved the index to a Downtrend from an Uptrend Under Pressure as it breached support along its 100-DMA. We see immediate support along its 200-DMA (-2%).
Global Focus Emerging
The CSI 300 posted a modest gain of 0.35% in the four-trading-session week. The market remained in an Uptrend Under Pressure with six distribution days. The index tested resistance at its 21- (~4,890, +0.5%) with the next support at July 28’s low (~4,664, -4.2%).
China A Shares
The CSI 300 fell 2.45% on lower volume and remains in Rally Attempt. The index trended down and breached the 21-DMA (5,069, +0.7%). The next level of support is the 200-DMA (4,927, -2.1%) and the next level of resistance is the 100-DMA (5,207, +3.4%). Caixin services PMI rose to three-month highs of 54.3 (from 51.5 in February) and has remained in expansion for 11 months. March’s PPI and CPI rose 4.4% and 0.4%, y/y, respectively, stronger than expectations and February’s reading due to commodity price increases. Steel companies surged as the industry is expected to reduce production to reach the peak of carbon emissions by 2030. The defense sector also showed good gains as military stocks’ earnings beat consensus, indicating strong demand in the 14th five-year period (2021‒2025). Consumer Staple, new Energy, and Heath Care underperformed and have been very volatile this week. We’ve noticed very quick sector rotation. Market sentiment was dampened by concerns over inflation and policy tightening. Entering earnings season, we recommend investors focus on companies with strong earnings. Stay patient and selective on stocks with improving technical profiles.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq rallied strongly this week, building on last week’s gains and now approaching levels of potential resistance. The S&P 500 is now sitting just below its upper channel line, a level the index has respected since breaking out last November. The Nasdaq, after regaining its 50-DMA late last week, is now on the right side of an eight-week consolidation and approaching resistance near all-time highs of 14,175. The 10- and 21-DMAs are now sharply rising and could act as potential near-term support should a pullback occur. Distribution is now a non-factor with the count over five weeks standing at two and three, respectively. There will be no further expiration for two weeks.
European Focus
On Thursday, the Stoxx 600 closed 1.07% above last Thursday’s close. Of the 17 indices that we cover, 13, including the Stoxx 600, are in a Confirmed Uptrend and the remaining in an Uptrend Under Pressure. This week, we upgraded the U.K. to a Confirmed Uptrend as it reclaimed its prior highs. Austria and Belgium were shifted to a Confirmed Uptrend last Thursday after reclaiming their respective prior highs.