Australia’s ASX All Ordinaries Index rose 0.20% this week. It is trading 4.99% above its 50-DMA and 0.92% below its 200-DMA
Symbol: LPTY.HK
WON Global View
The U.S. market is in a Confirmed Uptrend. The S&P 500 cleared above its 200-DMA, while the Nasdaq touched that level and then reversed to close at the lows of the session, albeit in light volume. Look for the major averages to avoid distribution and for leading ideas to hold above individual support levels should the major averages pull back off current levels.
WON Global View
The U.S. market is in a Confirmed Uptrend. The S&P 500 is now touching resistance at its 200-DMA, while the Nasdaq is trading 60bps below that level. Six of 11 O’Neil sectors are now trading above their respective 200-DMA, with Capital Equipment, Technology, and Transportation regaining that level yesterday. Breakouts continue to increase, and leading ideas remain healthy. We maintain our positive view on the general market.
APAC Weekly Summary
Key Points:
There was no change in the MSCI Asia or market conditions through Wednesday. The MSCI is consolidating near resistance while the majority of APAC remains in a Confirmed Uptrend. As of Thursday (February 7), we added nine new ideas to our APAC Focus List. We continue to notice constructive price action across sectors. The number of stocks above the 200‐DMA is rising. This is encouraging. Japan is in a Rally Attempt and we are still waiting for an official follow‐through day. The Nikkei is in its twenty‐ninth trading session without one, despite rising ~12% above December lows.
Looking back at Rally Attempt days over the past 10 years, it is rare that the Nikkei not have a strong follow‐through day.
The longest Rally Attempt most recently was from March to May 2018. The number of stocks breaking out or in pivot is still low historically. Currently, the most improvement in stocks with RS Ratings greater than 80 are among mid‐cap Japanese stocks ($2B to $10B market cap). Japan’s Sector Graph shows short‐term rotation into Technology and Cap Equipment. Although they are still lagging longer term, we are noticing early signs of improvement. We provided an Interest list of Japanese ideas with both strong fundamental growth and improving technical ratings. In our Focus List, we highlighted Lasertec (LASE.JP; 6920: JP).
WON Global View
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to consolidate constructively below resistance along their respective 200-DMA. Distribution remains at two days on the S&P 500 and one on the Nasdaq. All 11 O’Neil sectors remain above their respective 50-DMA. Leadership remains healthy, with new ideas across multiple industry groups making new highs each session. We remain positive on the general market.
APAC Weekly Summary
Key Points:
APAC strength continues to broaden with the rest of global markets. The MSCI Asia ex. Japan is on its fifth straight week of gains, rising nearly every week in 2019. The index is now right at the 200-DMA, where healthy resistance could be.
Market conditions continue to improve. On February 5, we upgraded Australia to a Confirmed Uptrend. Keeping our eyes on the APAC Sector Heat Map, strength across sectors continues to broaden, with every sector up in the trailing four weeks. The top sectors are Technology, Energy, and Financial. Defensive sectors with the highest average RS Rating are Utilities and Consumer Staple, consistently for several weeks now. Furthermore, Staple stocks have the most improvement in RS in the trailing four weeks.
Consumer Staples also have the highest average EPS Rank. Highlighting the Financials sector, 47% of those stocks are now trading above the 200-DMA (second behind Utilities with 55%). Constructive action is broadening within the sector. Within Financials, REITs stand out, especially in Hong Kong, where several have weathered the volatility and are now approaching pivots. See our list for ideas. In our Focus List we highlighted Kotak Mahindra Bank ( KOK.IN; KMB: IN ) and new addition Bajaj Finance ( BJF.IN, BAF: IN ).
APAC Weekly Summary
On January 15, we upgraded Mainland China markets to a Confirmed Uptrend as the CSI 300 had another follow‐through day. This is the seventh attempt as six have failed since 2018. In our note, we compare this current bear market trend to the last three in China’s history. It is not uncommon for the index to have several failed follow‐through days in a bear market (13 occured from 2009–2013). Now down 33% from January 2018 highs, the index is not even close to its worst correction of 73% from 2007–2008. Moreover, it is still below its average of 56% peak‐to‐trough. Since 2007, a bear market has lasted 325 days on average. Today, it is slightly higher, at 343 days.
Although we only look at a small sample of recent market cycles in China, it does provide perspective on how conditions could
worsen. On the bright side, the peak‐to‐trough duration is long from a historical perspective. This suggests, at the very least, a
bottom getting closer, assuming a 2009–2013 cycle is not in the works. Nonetheless and disregarding our skeptical feelings, the
follow‐through day is a sign of a turn in overall trend we want to highlight for clients. We continue to look for more signs of
improvment in indicies and the price action of growth stocks, which would increase our conviction.
We are more constructive on the Hang Seng Index that, unlike the CSI 300, avoided making new lows in January. The Hong Kong market remains in an Uptrend Under Pressure, but it is encouraging that distribution days declined in recent weeks. We
are waiting to see if the index can rise about ~27,300 to shift the market back to a Confirmed Uptrend.
Looking at Sector Rotation, Utilities have lost momentum recently while Capital Equipment and Financial sectors are
now improving in the short term and outperforming over the last 26 weeks. We provided several ideas to keep on radar, many
within REIT and infrastructure groups. Lastly, we highlight two stocks of interest, Logan Property (LPTY.HK, 3380: HK) and BOC Aviation (BOCA.HK, 2588: HK).
