The CSI 300 declined 1.1% for the week on above 10-week average volume. The market remains in a Confirmed Uptrend. Its distribution day count increased by one, taking its count to six. Market volatility increased with a crowd of important news or data this week. Bullish news that trade negotiations had made substantial progress was not enough to boost the market up. China’s better-than-expected September financial data pulled the index up temporarily before it extended losses on disappointing economic data, including Friday’s news of lower-thanexpected Q3 GDP growth. The cautious and risk averse sentiment has largely risen as it is believed that downward pressure on China’s economy has increased. The beginning of corporate third quarter results also hit optimism overall to some degree. We expect the CSI 300 to consolidate in the near term and face next support at its 50-DMA (+1.0%). We would like to see an increase in distribution days or an undercut of key support before downgrading the market condition.
Symbol: VGA.IN
Global Focus Emerging
The CSI 300 rose 2.6% for the week as the market reopened after the long holiday. The market remains in a Confirmed Uptrend with five distribution days. Our conviction increased as the index rebounded after hitting a new low and had a three-day gaining streak. We believe the 50- DMA is providing effective support. Even so, volume has been lower than average, indicating cautious sentiment due to uncertainties around Sino- U.S. trade talks that began Thursday; the market has been cautiously optimistic. As we approach Q3 earnings, investors are focusing more on the domestic. We see the CSI 300’s next support at its 50-DMA (~3,800) and immediate resistance at September highs (~4,000). We reiterate the importance of heavy trading volume to confirm a strong rally. Until then, investors are advised to stay patient and focus on leading stocks that have good earnings estimates and have recently broken out.
Global Focus Emerging
China markets were closed for the National Day holiday for most of the week and will reopen on Tuesday, October 8. We reiterate a cautious approach going into trade talks next week. The CSI 300 has recorded five distribution days in recent weeks and is testing the 50-DMA (~3,800). Further weakening of the index could raise concern and we anticipate volatility to remain at an elevated level near term.
Global Focus Emerging
The CSI 300 dropped 2.1% for the week on lower volume and remains in a Confirmed Uptrend. The number of distribution days is now at five over the past three weeks. We are watching to see if clustering becomes an early sign of market pressure. The market continued moving sideways as trading volume further declined. With the National Day holiday approaching, wait-and-see sentiment is strong; conservative investors tend to reduce positions or hold cash in case of uncertain events in overseas markets during the holiday. China’s industrial profits fell 2% in August, reversing the previous month’s gain (2.6%) and a sign that the economic growth is still bottoming. The possible impeachment of U.S. President Trump cast another shadow over trade tensions. Although the market is in an Uptrend, we remain cautious due to recent heavy selling pressure. The CSI 300 is testing 50-DMA support and we expect consolidation to continue in the near term. Investors are advised to stay cautious, focusing on quality growth stocks with good prospects.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are testing resistance at or near
all-time highs with four and five distribution days, respectively. One distribution day expires on the S&P 500 next
week and two expire on the Nasdaq. Support remains the rising 21- and 50-DMA on both indices.
Eight of 11 O’Neil sectors are trading 1% or more above their respective 50-DMA, led by Utility, Energy, and
Health Care this week. 142 of 197 O’Neil Industry Groups and ~75% of S&P 500 stocks are also trading above
their respective 50-DMA. Notable moves higher this week came from Solar, Medical Equipment, Home Builders,
and Reits.
Global Focus Emerging
The CSI 300 fell 0.9% for the week on slightly lower volume. The market remains in a Confirmed Uptrend with three distribution days. Disappointing industrial production, consumption, and fixed-asset investment data for August revealed pressure on China’s economy, which impacted market sentiment. The new one-year Loan Prime Rate was cut 5bps, in line with consensus and thus not a great boost to the market. The CSI 300 has immediate support at ~3,890 then at its 50-DMA (+3.2%). We look for immediate resistance at ~4,000 then at ~4,100. As global liquidity eases and positive domestic policies are introduced, risk appetite has increased. The electronics sector outperformed this week as Huawei and Apple unveiled new products. We expect the CSI 300 to continue consolidating in the short term, as sentiment may improve ahead of the National Day holiday, coupled with continued uncertainty surrounding trade talks.
APAC Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- Out of 13 APAC markets, seven are in a Confirmed Uptrend, two are in an Uptrend Under Pressure, and four remain in a Rally Attempt.
- South Korea was moved to a Confirmed Uptrend from a Rally Attempt on August 30. The KOSPI has gained 5.2% since the follow-through day and it has reclaimed its 50- and 100-DMA. It is trading 1.5% below its 200-DMA. Historically, it has faced consistent resistance along its 200-DMA. We recommend staying patient and selective until the market reclaims its 200-DMA on higher volume.
- Refer to page 7 for a detailed Datagraph of the KOSPI and page 8 for a comparison graph of the KOSPI, the S&P 500, and the Nikkei.
- In South Korea, value stocks are leading over the last four weeks, similar to Japan.
- Strength has yet to broaden in South Korea as only 34% of liquid stocks are trading above their 50- and 200-DMA. In the last four weeks, Health Care stocks have gained significantly, while Technology stocks have lagged.
- Refer to page 9 for stocks near pivot in South Korea.
- Refer to page 10 for actionable Focus List ideas.
- Refer to pages 5–6 for recent addition Interglobe Aviation (VGA.IN).
Won Global View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 is now testing resistance at all-time highs, while the Nasdaq is trading ~2% below that level. Distribution went unchanged last week at three and five days, respectively, with one expiring on each index on Wednesday. We will be looking for a breakout into new highs in the coming days, however, to remain constructive on a potential pullback, we will be looking for the major averages to hold above their respective 21- and/or 50-DMA while avoiding any significant pickup in distribution. The 21-DMA is set to cross above the 50-DMA on both indices this week.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 is now testing resistance at all-time highs, while
the Nasdaq is trading ~2% below that level. Distribution was unchanged this week at three and five days, respectively, with one expiring on each index on Wednesday. We will be looking for a breakout into new highs in
the coming days, however, to remain constructive on a potential pullback, we will be looking for the major averages to hold above their respective 21- and/or 50-DMA while avoiding any significant pickup in distribution. The
21-DMA is set to cross above the 50-DMA on both indices next week
WON Global View
The U.S. market is in a Confirmed Uptrend. Indices traded in a seesaw fashion yesterday, but price action remains constructive and the indices continue to consolidate above prior resistance levels at 2,815 (November 2018 high) on the S&P 500 and 7,670 (October 2018 high) on the Nasdaq. One distribution day will expire on the S&P 500 after the close today.
