The U.S. market remains in a Downtrend. The S&P 500 and Nasdaq undercut last Thursday’s lows, closing at the lows of the session in
heavy volume. The next level of support is December 2018 lows (S&P 500: 2,346 (-1.6%); 6,190 (-10.3%)). We are again looking for
indices to establish and hold above a new low.
Symbol: SKJ.KR
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%).
Global Focus Emerging
The CSI 300 surged 5.04% on lower volume this week. We shifted the market back to a Confirmed Uptrend from under pressure after seeing a strong rise Thursday. The number of distribution days fell to two, with one expiring. China’s market remains constructive and continues to stand out among global markets. The coronavirus epidemic is on track to be under control and is believed to bottom out going forward. China’s government announced the speedy construction of new infrastructure, such as 5G networks, data centers, new energy vehicle charging stations, and AI, to combat economic pressure. Investors are advised to focus on beneficial sectors and select leaders with healthy fundamental and technical profile. Meanwhile, avoid extended names because profit-taking pressure would increase should the overseas correction continued. The CSI 300 has immediate support at the 50-DMA ~4,050 (-2%), followed by the 100-DMA ~4,000 (-3%). The next resistance is January highs of ~4,220 (+2%).
Global Focus Emerging
The CSI 300 fell 5.05% this week, registering its biggest weekly loss since last April. The number of distribution days increased to three and we shifted the market to an Uptrend Under Pressure from a Confirmed Uptrend as the CSI 300 broke below its 50- and 100-DMA Friday. Rising fears of the coronavirus spreading outside China triggered selloffs around the world. China, seemingly unaffected the first few days of the week, joined the U.S. market in a correction. Previously leading technology stocks suffered more losses: the ChiNext index plunged nearly 7% this week on higher volume. We advise a defensive approach amid rising coronavirus concerns worldwide and trimming positions in extended names. As companies release their preliminary earnings reports for FY19, investors should watch for disappointing results. The CSI 300 is now trading 0.7% below its 100-DMA. Next support lies at the 200-DMA or ~ 3,870 (-1.7%).
Global Focus Emerging
The CSI 300 rose 4% on much higher volume this week. We upgraded the market to a Confirmed Uptrend from a Rally Attempt on February 17 as it registered a follow-through day. Major stock indexes rose as Chinese authorities launched new stimulus measures to steady the economy and curtail the impact of the coronavirus outbreak. Investors’ risk preference has improved on China’s strong credit growth in January and the expectation of more stimulus measures. Technology stocks continue to outperform, driving the tech-heavy ChiNext index to three-year highs. The CSI 300 retook its 50-DMA on high volume and hit new rally highs. As momentum has remained strong since February 3, we expect increased pullback pressure on the market. Investors are advised to stay patient and avoid chasing extended ideas. Select leading names that are trading constructively within a buy area. We see the CSI 300’s the next resistance near January highs of 4,200 and next support at the 50-DMA (~4,000) in the near term.
Global Focus Emerging
The CSI 300 rose 2.25% on lower volume this week and the market remains in a Rally Attempt. The index continued to rally and retook its 100-DMA. We would like it hold above this level to remain constructive. Investors are concerned about how soon the coronavirus outbreak will peak and a follow-through day could occur should fears subside. Expectations of an interest rate cut have increased to boost China’s economy. Investors are advised to stay patient, waiting for more signals. Meanwhile, focus on sectors with guaranteed growth and select leading names with strong fundamental and technical ratings. The CSI 300 faces immediate resistance at the 50-DMA (~4,000) and is testing support along its 100-DMA at ~3,950. The next level of support is at the 200- DMA (3,860) if the 100-DMA fails.
Global Focus Emerging
The CSI 300 dropped 2.6% on higher volume this week and the market is in a Rally Attempt. The coronavirus outbreak hit the market sharply as it fell 7.9% Monday, then continued to rise for a fourth consecutive trading day. The outbreak and rapid spread of the virus could put more pressure on China’s already slowing economic growth. In addition, a weaker yuan and pressure on leisure, travel, and retail stocks have worried investors. Market sentiment has been buoyed somewhat by the solid rebound in recent days, but we are keeping a close eye on strong resistance at 3,914–3,972. We expect the CSI 300 to consolidate, with its 200-DMA (~3,865) providing short-term support. A follow-through day could still occur any day going forward. The tech-heavy ChiNext index was trading constructively this week, gaining 4.57% and hitting 52-week highs. We advise investors to be rational and cautious, focusing on sectors that would benefit directly from the battle against the coronavirus or industry leaders with guaranteed growth that are immune to the epidemic.
Global Focus Emerging
Chinese markets remain in an Uptrend Under Pressure with six distribution days. Markets will reopen on Monday following a delay due to the coronavirus.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq staged downside reversals Friday,
closing at their respective 10-DMA. Distribution rose on the Nasdaq to three days, matching the S&P 500. We
are now looking for indices to find support at their respective 21-DMA (S&P 500: 3,271; Nasdaq: 9,179) should
weakness persist early next week. We will likely shift the market status to Uptrend Under Pressure should this
level break as the next level of support is the 50-DMA, which is 3–5% below current levels.
Breadth is beginning to narrow. Nine of 11 sectors, 155 of 197 industry groups, and 64% of S&P 500 stocks are
trading above their respective 50-DMA. This is down from all 11 sectors, 173 of 197 industry groups, and 82%
of S&P 500 stocks last week. Energy and Basic Material remain the two weakest sectors, while extended sectors
such as Technology and Heath Care staged downside reversals off all-time highs to close the week.
Global Focus Emerging
The CSI 300 fell 3.6% for the holiday-shortened week on lower volume and was moved to an Uptrend Under Pressure as the distribution day count rose to six from four. The Wuhan coronavirus, which has infected more than 600 people and killed 17 people as of January 23, hurt investors’ risk appetite substantially. Stocks related to retailing, leisure services, airlines, and films suffered from strong selling pressure. The CSI 300 breached previous support at ~4,100 and tested 50-DMA support. The next immediate support is at ~3,925. We are looking for a reliable solution to control the epidemic in order to increase our conviction. Investors are advised to stay cautious and focus on quality ideas with strong expectations approaching earnings season.
