The CSI 300 rose 3.64% on higher and above average volume this week. The market was shifted to a Confirmed Uptrend Tuesday with the number of distribution days rising to 6. The index broke above two-month resistance at its 100-DMA (~5,250, -1.6%) with no clear resistance until January’s consolidation are at 5,300–5,600. Next support lies at the 21-DMA (5,145, -3.3%). Industrial profits rose 106% y/y in January through April and increased 49.6% compared with same period of 2019. Securities stocks led due to the recent active trading. Food & Beverage followed the gains, mainly driven by Baijiu. Agriculture stocks lagged due to expectations of falling pork prices. Market sentiment was supported by the appreciation of the RMB to USDCNH 6.36, a three-year high, and lessening worries about inflation as commodities prices fell. Our conviction increases as the CSI 300 retook and holds above key support at its 100-DMA. We advise investors to gradually increase risk exposure and be selective about quality stocks breaking out of solid bases. Avoid chasing highs. Northbound trading via the HK-China Stock Connect posted a net inflow of RMB 46.8B this week, and Tuesday’s inflow of RMB 21.7B was the largest daily inflow in history.
Tag: Confirmed Uptrend
European Focus
On Thursday, the Stoxx 600 ended 0.45% above last Friday’s close. Of the 17 indices we cover, 10 are in a Confirmed Uptrend and seven in an Uptrend Under Pressure. This week, we upgraded Switzerland and Italy to a Confirmed Uptrend after they reclaimed their prior rally high
European Focus
On Thursday, the Stoxx 600 closed 0.14% lower compared with last Friday’s close. Of the 17 indices that we cover, eight are in a Confirmed Uptrend, including the U.K., France, and the Stoxx 600, and the remaining are in an Uptrend Under Pressure. We upgraded Belgium to a Confirmed Uptrend on Monday after it reclaimed its prior high.
European Focus
On Thursday, the Stoxx 600 ended 1.71% below last Friday’s close. Of the 17 indices we cover, seven are in a Confirmed Uptrend and 10 in an Uptrend Under Pressure. This week, we shifted the Stoxx 600 and Luxembourg to a Confirmed Uptrend after they reclaimed their previous highs, and downgraded Norway and Ireland to an Uptrend Under Pressure after they breached their 50-DMA.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 remains at all-time highs after bouncing off
support at its rising 21-DMA and testing its upper channel line. After a sharp pullback on Tuesday, the Nasdaq
found support and bounced higher off its 50-DMA. The distribution day count stands at five and four on the S&P
500 and Nasdaq, respectively, with one day expiring on Nasdaq at the end of next week.
China A Shares
The CSI 300 fell 2.49% on higher volume this week. The market remains in a Confirmed Uptrend with the number of distribution days rising to three. The index fell below its 21-DMA (5,070, +0.2%) and is testing support at its 200-DMA (4,993, -0.1%), with next support at ~4,900 (-1.9%). Immediate resistance lies at its 21-DMA (5,062, +1.3%) and the declining 50-DMA (5,120, +2.5%). April’s Caixin Service PMI was 56.3, in the expansion range for 12 months and higher than the previous reading of 54.3. April’s exports and imports (in $) rose 32.3% y/y and 43.1% y/y, respectively, beating expectations and March’s growth. The trade surplus was $42.9B, beating consensus of $33.1B. Energy and Metals surged due to the supply shortage caused by the worsening relationship with Australia. Steel stocks surged as the government limits the expansion of steel production capacity in air pollution control areas. Health Care lagged as vaccine stocks plunged after the U.S. supported waiving patent protection for COVID-19 vaccines. The semiconductor sector plunged. Market sentiment was weighed down by Sino-West tensions. We advise investors to take a cautious approach as the index is testing the support of its last moving average. Be selective and focus on companies with strong earnings and improving technical profiles.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 remains at all-time highs after bouncing off support at its rising 21-DMA and testing its upper channel line. After a sharp pull back on Tuesday, the Nasdaq found support and bounced higher off its 50DMA. The distribution day count stands at five and four on the S&P 500 and Nasdaq, respectively, with one day expiring on Nasdaq at the end of next week.
European Focus
On Thursday, the Stoxx 600 closed 0.83% above last Friday’s close. Of the 17 indices that we cover, seven are in a Confirmed Uptrend, including the U.K. and France, and the remaining are in an Uptrend Under Pressure. Germany, the Stoxx 600, Ireland, Finland, Sweden, Belgium, the Netherlands, and Luxembourg were downgraded to an Uptrend Under Pressure after they breached their respective 21- DMA. Switzerland and Italy were also downgraded to an Uptrend Under Pressure after they breached their 50-DMA. Ireland was upgraded to a Confirmed Uptrend after it reclaimed its prior high
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 made another new all-time high Thursday, moving back above its upper channel line and more than 5% above its 50-DMA before pulling back from extended levels Friday. The Nasdaq briefly touched a new all-time intraday high Thursday, before also pulling back on Friday. We continue to view short-term support at the rising 21-DMA for both indices. The distribution day count stands at four and three, respectively, with no expiration for two full weeks.
China A Shares
The CSI 300 fell 0.23% on slightly higher but below-average volume this week. The market remains in a Confirmed Uptrend with the number of distribution days rising to two. The index trended upward and challenged resistance at its 50-DMA (~5,146, +0.4%), with next resistance at its 100- DMA (5,223, +1.9%). Immediate support lies at the 21-DMA (5,072, -1.0%). China’s official PMI was 51.1 in April, missing consensus of 51.8 and lower than March’s 51.9, indicating slower recovery but still above the break-even level of 50. Q1 industrial profits increased 137% to RMB 1.83T and 50.2% over Q1 2019. Heath Care remained strong due to concerns about surging COVID-19 cases in India. The steel sector underperformed as the government lowered import taxes and lifted export taxes to increase domestic supply. Market sentiment was boosted by strong FY20 and Q1 FY21 corporate earnings. Be selective and focus on companies with strong earnings and improving technical profiles. China’s market will be closed Monday to Wednesday next week due to the Labor Day holiday.
