The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq reversed off early week gains to close flat for the week. Despite a sharp pullback Friday, both indices avoided distribution as volume came in below Thursday’s spike. Distribution now stands at two and three days, respectively, with one set to expire on the S&P 500 next week. Support remains the rising 21-DMA on both indices (S&P 500: 2,797; Nasdaq: 8,421).
Author: Sandeeep N
European Focus
On Thursday, the Stoxx 600 ended 3.17% above last Friday’s close. Of the 17 indices that we cover 16 are in a Confirmed Uptrend, and one is in an Uptrend Under pressure.
Global Focus Developed
Australia’s ASX All Ordinaries Index gained 0.5% this week. It faces resistance along its 50-DMA. The index remains in a Confirmed Uptrend and has one distribution day.
Global Focus Emerging
The CSI 300 rose 3.04% this week on a four-day gaining streak and rose 6.14% this month. The market remains in a Confirmed Uptrend with three distribution days (two expired). The index retook its 50- and 200-DMA in two successive days and volume picked up although remained below average. We would like 200-DMA support to hold to remain constructive. The CSI 300 is testing immediate resistance at its 100-DMA (+0.6%), followed by the gap at ~4,028 (+3.0%). Beijing has eased its epidemic control measures and the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference will be held May 22, raising expectations that economic recovery will speed up and more fiscal stimulus will be imminent. China’s official manufacturing PMI in April slipped to 50.8 from March’s 52.0, while the Caixin survey, which focuses mostly on small and export-oriented businesses, fell to 49.4, suggesting the pandemic shattered global demand. Our conviction has increased following Thursday’s resistance break and we recommend buying ideas that emerged from sound bases or key support levels with volume.
Global Focus Frontier
Saudia Dairy and Foodstuffs Company (Sadafco) is engaged in the manufacturing and distribution of food products. UHT Milk, tomato paste and Icecreams are its major products.
China A Shares
The CSI 300 fell 1.11% this week on lower volume. The market remains in a Confirmed Uptrend with five distribution days. The index has hit resistance at its 50-DMA and is consolidating after hitting highs following March’s low of 3,503 (-7.7%). With consistently thin trading volume, we expect the market to trade sideways between resistance and the gap of ~3,738 (-1.5%) in the near term. We would like it to stay above 21-DMA support to remain constructive, followed by support at ~3,627 (-4.5%). China further cut its benchmark lending rate this week to support the economy amid the pandemic and raised expectations of a comprehensive rate cut. However, since the coronavirus spread overseas has not yet peaked and unprecedented oil price declines boosted fears of a recession, the domestic market is in a wait-and-see mood. As volatility picks up and rotation speeds up, investors are advised to stay cautious and focus on ideas that benefit from policy support, mainly targeted at stimulating domestic consumption. The Consumer Staple, Health Care, and Retail sectors are outperforming while Technology lagged over the last four weeks. With earnings to continue next week, we recommend watching closely.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating gains with low distribution. The S&P 500 is trading at its 50-DMA, while the Nasdaq is trading at its 100-DMA. Distribution stands at one day each, not including stalling action on Thursday. The 21-DMA remains a key level of short-term support.
European Focus
This week’s economic data indicated a bigger-than-expected impact of COVID- 19-related shutdowns on the region’s economy. Markets, which were gaining momentum on increased hope of a cure, were retracting today after a leaked paper from the World Health Organization indicated the failure of Remdisivir, a potential drug for COVID-19. As of Thursday’s close, the Stoxx 600 has lost 0.07% from last Friday’s close.
Global Focus Developed
Australia’s ASX All Ordinaries Index lost 4.4% on below average volume. It faces resistance along its 10-WMA. The index remains in a Confirmed Uptrend and has two distribution days after adding one distribution day this week.
Global Focus Emerging
The CSI 300 fell 1.11% this week on lower volume. The market remains in a Confirmed Uptrend with five distribution days. The index has hit resistance at its 50- DMA and is consolidating after hitting highs following March’s low of 3,503 (-7.7%). With consistently thin trading volume, we expect the market to trade sideways between resistance and the gap of ~3,738 (-1.5%) in the near term. We would like it to stay above 21-DMA support to remain constructive, followed by support at ~3,627 (-4.5%). China further cut its benchmark lending rate this week to support the economy amid the pandemic and raised expectations of a comprehensive rate cut. However, since the coronavirus spread overseas has not yet peaked and unprecedented oil price declines boosted fears of a recession, the domestic market is in a wait-and-see mood. As volatility picks up and rotation speeds up, investors are advised to stay cautious and focus on ideas that benefit from policy support, mainly targeted at stimulating domestic consumption. The Consumer Staple, Health Care, and Retail sectors are outperforming while Technology lagged over the last four weeks. With earnings to continue next week, we recommend watching closely.
