The CSI 300 rose 3% this week on higher volume. The market remains in a Confirmed Uptrend with two distribution days. Boosted by better-than-expected factory activity in December and signs of easing monetary policy, the A-share market rallied strongly for the first three trading sessions. We remain positive on the general market, however, given the strong move higher over the last several weeks, a correction would not be unexpected. Since the Chinese economy still faces great downturn pressure and global market volatility could increase due to tensions in the Middle East, we advise remaining patient and focusing on quality ideas emerging from solid bases or rallying off key levels of support. Also consider trimming positions in ideas that are extended 20% or more above buy points. The CSI 300 broke above 2019’s high of 4,126 and is expected to consolidate. We are looking for the next level of resistance at 2018’s high of ~4,403 and the next level of support at the 50-DMA (~3,940) if immediate support at ~4,120 fails.
Symbol: CMT.CN
Global Focus Emerging
The CSI 300 rose 3% this week on higher volume. The market remains in a Confirmed Uptrend with two distribution days. Boosted by better-than-expected factory activity in December and signs of easing monetary policy, the A-share market rallied strongly for the first three trading sessions. We remain positive on the general market, however, given the strong move higher over the last several weeks, a correction would not be unexpected. Since the Chinese economy still faces great downturn pressure and global market volatility could increase due to tensions in the Middle East, we advise remaining patient and focusing on quality ideas emerging from solid bases or rallying off key levels of support. Also consider trimming positions in ideas that are extended 20% or more above buy points. The CSI 300 broke above 2019’s high of 4,126 and is expected to consolidate. We are looking for the next level of resistance at 2018’s high of ~4,403 and the next level of support at the 50-DMA (~3,940) if immediate support at ~4,120 fails.
China A Shares
The CSI 300 rose 0.12% this week on lower volume and remains in a Confirmed Uptrend with two distribution days. China’s infrastructure investment plans for 2020 and possible stimulus measures to boost the economy lifted market sentiment. Profits earned by China’s major industrial firms in November broke a three-month declining streak and grew at an eightmonth high. The CSI 300 index was trading constructively above its 50-DMA with resistance at its previous high of ~4,067. We expect the index to consolidate around ~4,020, and the next support level lies at ~3,919. Nonferrous metals and building materials stocks (CMT.CN and BOY.CN on our Focus List) were leading this week. We advise investors to stay cautious and patient and wait for more details on the stimulus or further progress on the U.S.-China trade deal. Focus on stocks with decisive breakouts from solid bases or that bounce off key levels of support on volume
Global Focus Emerging
The CSI 300 rose 0.12% this week on lower volume and remains in a Confirmed Uptrend with two distribution days. China’s infrastructure investment plans for 2020 and possible stimulus measures to boost the economy lifted market sentiment. Profits earned by China’s major industrial firms in November broke a three-month declining streak and grew at an eight-month high. The CSI 300 index was trading constructively above its 50-DMA with resistance at its previous high of ~4,067. We expect the index to consolidate around ~4,020, and the next support level lies at ~3,919. Nonferrous metals and building materials stocks (CMT.CN and BOY.CN on our Focus List) were leading this week. We advise investors to stay cautious and patient and wait for more details on the stimulus or further progress on the U.S.-China trade deal. Focus on stocks with decisive breakouts from solid bases or that bounce off key levels of support on volume.
China A Shares
The CSI 300 rose 1.24% this week on higher volume and remains in a Confirmed Uptrend with three distribution days. The finalization of terms of a phase one China-U.S. trade deal significantly boosted market sentiment. China’s stronger-than-expected November economic data signaled that government’s policies seem to be taking effect, improving investors’ risk appetite. The CSI 300 was trading constructively after decisively breaking above the previous November’s high and is testing the next resistance at April’s high (~4,100). We are hopeful the index holds above support at ~3,925. Due to heavy selling pressure approaching April’s high, we expect the index to consolidate around ~4,020 in the near term. Investors need to remain disciplined and avoid extended ideas as volatility increases near the area of intense pressure. The Technology and Capital Equipment sectors were leading while Health Care stocks have been lagging our Focus List for a month. Health Care remains weak and we advise investors to trim positions. We recommend accumulating positions in stocks with decisive breakouts from solid bases or key support levels. Profits earned by China’s major industrial firms in November, another important economic indicator, are expected to be released next Friday.
Global Focus Emerging
The CSI 300 rose 1.24% this week on higher volume and remains in a Confirmed Uptrend with three distribution days. The finalization of terms of a phase one China-U.S. trade deal significantly boosted market sentiment. China’s stronger-than-expected November economic data signaled that government’s policies seem to be taking effect, improving investors’ risk appetite. The CSI 300 was trading constructively after decisively breaking above the previous November’s high and is testing the next resistance at April’s high (~4,100). We are hopeful the index holds above support at ~3,925. Due to heavy selling pressure approaching April’s high, we expect the index to consolidate around ~4,020 in the near term. Investors need to remain disciplined and avoid extended ideas as volatility increases near the area of intense pressure. The Technology and Capital Equipment sectors were leading while Health Care stocks have been lagging our Focus List for a month. Health Care remains weak and we advise investors to trim positions. We recommend accumulating positions in stocks with decisive breakouts from solid bases or key support levels. Profits earned by China’s major industrial firms in November, another important economic indicator, are expected to be released next Friday.
China A Shares
The CSI 300 rose 1.69% this week on higher volume. We upgraded the market to a Confirmed Uptrend after Friday’s close as the CSI 300 broke above its 50-DMA and surged 1.98% on heavy volume. The distribution day count fell to three. After four days trending flat, the index surged Friday on news that the U.S. agreed to a phase-one trade deal with China and to delay tariffs that were slated to go into effect on December 15. China’s Annual Central Economic Work Conference concluded Thursday with signals of a looser economic policy, boosting sentiment. Most sectors gained this week, with Technology outperforming. Our conviction has increased and we recommend gradually adding positions in names with strong fundamentals and a good technical profile. Avoid chasing extended ideas. The CSI 300’s next support is at the 50-DMA at ~3,900 (-1.7%) and resistance is at 3,970–4,030.
Global Focus Emerging
The CSI 300 rose 1.69% this week on higher volume. We upgraded the market to a Confirmed Uptrend after Friday’s close as the CSI 300 broke above its 50-DMA and surged 1.98% on heavy volume. The distribution day count fell to three. After four days trending flat, the index surged Friday on news that the U.S. agreed to a phase-one trade deal with China and to delay tariffs that were slated to go into effect on December 15. China’s Annual Central Economic Work Conference concluded Thursday with signals of a looser economic policy, boosting sentiment. Most sectors gained this week, with Technology outperforming. Our conviction has increased and we recommend gradually adding positions in names with strong fundamentals and a good technical profile. Avoid chasing extended ideas. The CSI 300’s next support is at the 50-DMA at ~3,900 (-1.7%) and resistance is at 3,970–4,030.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq gapped up off their 21-DMA after
pulling back sharply to this moving average earlier in the week. Despite the volatility, indices closed relatively
unchanged for the week. Support remains at the 21-DMA (S&P 500: 3,113; Nasdaq: 8,550) with three distribu-
tion days on the S&P 500 and four on the Nasdaq.
Ten of 11 sectors, 146 of 197 industry groups, and 67% of S&P 500 stocks are trading above their respective
50-DMA. Health Care is the best performing sector over the trailing four, eight, and 13 weeks. Additionally,
seven of 15 healthcare-related industry groups are ranked in the top 55 of the O’Neil 197 (Best=1, Worst=197)
led by Biotech ( INCY ), Outpatient Care ( ADUS ), Equipment ( DXCM ) and Managed Care ( UNH ).
We remain positive on the general market. Despite the pullback earlier this week, indices remain above moving
average support as leadership remains intact. Continue to selectively increase risk in quality ideas emerging
from early-stage consolidation.
China A Shares
The CSI 300 rose 1.9% this week on lower volume. The market remains in an Uptrend Under Pressure with four distribution days. China’s stronger-than-expected manufacturing November PMI data lifted investor sentiment and drove the rise this week. Most sectors gained and Technology stocks outperformed, which increases our conviction that the market could continue to rebound. However, Sino-U.S. trade talks remain volatile and the market is pausing as December 15 approaches, when the U.S. will impose more tariffs on Chinese goods. We advise investors to stay cautious and patient, waiting for more signals. The CSI 300 retook its 50- and 100-DMA. We see immediate support at ~3,850 (-1.3%), followed by 200-DMA support at ~3,800 (-2.6%). The index faces immediate resistance at the gap above (3,950, +1.2%). We expect the index to continue consolidating within the box and recommend focusing on leading names with strong growth outlook and potential benefits from policy stimulus. Avoid chasing extended ideas.
