Author: Sandeeep N

The CSI 300 rose 1.12% this week on lower volume and fell 1.16% for the month. The market remains in an Uptrend Under Pressure with six distribution days. The A-share market staged a moderate rebound this week while volume remained low, suggesting a cautious market sentiment. China’s National People’s Congress Meeting that concluded this week approved a new but widely expected security law for Hong Kong, raising China-U.S. tensions. China’s industrial profits fell 4.3% y/y in April, a slower pace that indicates great pressure for firms’ earnings the rest of the year. More stimulus measures, especially targeted at domestic demand, are expected to support the economy. Consumer sectors outperformed in the trailing four weeks while technology stocks lagged under the rising geopolitical tensions. The market remains constructive but investors need to be very selective. We recommend investors allocate capital gradually to companies breaking above key resistance or pivot with sound fundamentals or strong recovery expectations. The CSI 300 has immediate support along the 50-DMA (-1.5%), followed by 3,740 (-3.3%). Immediate resistance is along the 200-DMA (+0.9%), followed by the 100- DMA (+2.1%).

The CSI 300 declined 2.27% this week on higher volume. We shifted the market to an Uptrend Under Pressure as the distribution day count rose to six. The CSI 300 broke below its 200-DMA on increased volume and is testing support at its 50-DMA (-0.2%). The next support is at ~3,740 (-2.2%), followed by ~3,637 (-4.9%). Resistance at previous highs of 3,998 (+4.5%) remains consistent. The National People’s Congress Meeting started Friday and will last seven days. China sets its GDP goal for 2020, pledges to expand spending, and gives priority to stabilizing employment and ensuring people’s wellbeing. The government will adopt a more flexible and moderate monetary policy, raising expectations of rate cuts or reserve ratio requirements going forward. Volume has been low and rising global tensions are impacting market sentiment worldwide. The Retail and Consumer Staple sectors outperformed the market while the Technology sector lagged for the trailing week. We recommend that investors avoid ideas that would be vulnerable to trade tensions and allocate capital gradually to fundamentally sound companies breaking above key resistance or pivot.