The U.S. market is in a Rally Attempt. The S&P 500 and Nasdaq rallied sharply higher off Monday’s intraday lows before pulling back on Friday. Both have now held those lows for more than three days and are now in position to stage a follow-through day. We continue to recommend waiting for a follow-through day before any meaningful increase in risk.
Author: Sandeeep N
European Focus
Rising Covid-19 cases were followed by stimulus packages from countries all over the world to protect their respective economies. Markets have overall reacted well to the stimulus, and on Thursday’s close, the Stoxx 600 gained 9.67%. Today, markets are erasing some of these gains, and the Stoxx 600 is losing 3.76% after its first three-day rally since mid-February.
Global Focus Developed
Australia’s ASX All Ordinaries Index closed flat this week after bouncing back from a new 52-week low and is trading 27% below its 200-DMA. The index was moved to a Rally Attempt on Thursday.
Global Focus Emerging
The CSI 300 rose 1.56% this week on lower volume. We upgraded the market to a Confirmed Uptrend after Tuesday’s follow-through day on the fourth day of a Rally Attempt. There are no distribution days. The index found support at ~3,500 and we would like it to remain above this level to be constructive. Although China’s market is holding up better than most overseas markets, we reiterate the need to stay cautious as trading volume has been less than average and the index remains below key resistance. China could follow the volatile U.S. market and become choppy, so we advise investors to maintain a defensive approach. The Health Care, Consumer Staple, and Retail sectors led the gains in the five trailing sessions and we advise focusing on defensive ideas from these sectors. The next support remains at recent lows of ~3,500 (-5.6%) then the 200- DMA at ~3,900 (+5.1%).
Global Focus Frontier
FPT Corporation (FPT.VN), a Vietnamese conglomerate, is focused on providing technology, telecom, and education services. The company is poised to experience solid growth due to its leadership position in software outsourcing and broadband internet services.
China A Shares
The CSI 300 dropped 5.88% on lower volume this week, shifting back to an Uptrend Under Pressure with four distribution days. We expect China’s market to remain resilient because, although it opened sharply lower, it regained most of that ground at the close of Friday’s session. The Chinese government continues policies to support the resumption of production and the Central Bank announced after the close Friday a 50–100bps cut in the reserve requirement ratio on March 16 for qualified banks, which will free up $79B. However, it is still necessary to be cautious due to increasing volatility and the coronavirus pandemic. We advise a defensive approach, watching names that are expected to be supported by policy stimulus and remaining constructive. The CSI 300 closed above its key 200-DMA. We would like it to hold above this level to remain resilient, otherwise, we would downgrade the market to a Downtrend. The next support is at February lows of ~3,640 (-6.5%) and immediate resistance is at the 100-DMA at ~4,000 (+2.7%), followed by the 50-DMA at ~4,060 (+4.2%).
US Focus
The U.S. market remains in a Downtrend. The S&P 500 and Nasdaq rallied strongly Friday, holding above Thursday’s low (S&P 500: 2,478; Nasdaq: 7,194) to close the week. We are now looking for this low to hold through Tuesday before a potential follow-through day as early as Wednesday (day four). There is no clear level of support above December 2018 lows of 2,346 (-13.5%), should Thursday’s lows be undercut.
European Focus
Rising coronavirus cases and deaths in Europe and subsequent lockdowns by many countries sent the market in a tailspin. On Thursday’s close, the Stoxx 600 dropped 11.48% lower and was down a huge 19.59% from last Friday’s close. Today, the markets are taking a breather; the Stoxx 600 is up 4.23% with all sectors in the green, paring some losses of a disastrous week. If the market closes in the green today, it’ll be the first up day since last Thursday
Global Focus Developed
Australia’s ASX All Ordinaries Index declined 11.1% this week and is 23% off its 52-week high. The index is in a Downtrend and is trading 17.7% below its 200-DMA.
Global Focus Emerging
The CSI 300 dropped 5.88% on lower volume this week, shifting back to an Uptrend Under Pressure with four distribution days. We expect China’s market to remain resilient because, although it opened sharply lower, it regained most of that ground at the close of Friday’s session. The Chinese government continues policies to support the resumption of production and the Central Bank announced after the close Friday a 50–100bps cut in the reserve requirement ratio on March 16 for qualified banks, which will free up $79B. However, it is still necessary to be cautious due to increasing volatility and the coronavirus pandemic. We advise a defensive approach, watching names that are expected to be supported by policy stimulus and remaining constructive. The CSI 300 closed above its key 200-DMA. We would like it to hold above this level to remain resilient, otherwise, we would downgrade the market to a Downtrend. The next support is at February lows of ~3,640 (-6.5%) and immediate resistance is at the 100-DMA at ~4,000 (+2.7%), followed by the 50- DMA at ~4,060 (+4.2%).
