The CSI 300 gained 1.77% for the week on slightly increased volume. The market remains in a Confirmed Uptrend with one distribution day. The leaders of the U.S. and China agreed to resume trade talks, and the U.S. agreed to suspend new tariffs on Chinese goods, causing the market to gap up on increased volume Monday. but has since pulled back while volume has continued to shrink. The CSI 300 faces great pressure after breaking through the gap, with the next immediate resistance at ~3,942 then at rally highs of ~4,126. Immediate support is at ~3,854 and then ~3,715. Chinese macro data for June will be released next week, and earnings season will start soon, so we expect the market to focus on fundamentals. Investors are advised to stay patient and focus on leading stocks that may have strong earnings and are breaking out of sound bases or rallying off key price support.
Tag: Confirmed Uptrend
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to act well, trading above multiple moving average support levels with a low number of distribution days. Near-term support remains the rising 10 and 21-DMA and distribution still stands at one day on the S&P 500 and two on the Nasdaq.
European Focus
On Thursday, the Stoxx 600 closed 2% above last Friday’s close and is in a Confirmed Uptrend. During the week, we moved France, Denmark, and the Netherlands to a Confirmed Uptrend after the indices registered new highs. Of the 17 indices we cover, 16 are in a Confirmed Uptrend and one is in a Rally Attempt.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq closed slightly lower this week, but both continue to hold trend above all major moving averages. The 21-DMA has risen above the 50-DMA on both indices and is now acting as our primary level of support. Resistance is all-time highs on the S&P 500 at 2,964, while resistance on the Nasdaq is the June 20 intraday high of 8,088. Distribution remains low at one day on the S&P 500 and two on the Nasdaq.
Sectors that sold off earlier in the week, including Transportation, Consumer Cyclical, Health Care, and Financial, were able to retrace the majority, if not all, of early week losses over the last two sessions. Ten of 11 O’Neil sectors are trading back above their respective 50-DMA, with Energy sitting just slightly under that level. Following Friday’s rally in Financials, 72% of S&P 500 stocks are now trading above their respective 50-DMA, up from 70% last week.
We remain in a news-driven environment with major catalysts potentially occurring over the weekend. As of now, the Confirmed Uptrend remains intact, with current upward progress in-line with historical successful follow-through days, leading ideas that are holding support, and a low number of distribution days. We recommend a patient approach, holding leading ideas and looking to increase risk should the market push up and through resistance in the coming days.
China A Shares
The CSI 300 fell 0.22% for the week on lower volume. The A-share market remains in a Confirmed Uptrend with two distribution days. We saw range-bound action in the market this week as investors await the Trump-Xi meeting at the G20, scheduled for this weekend. Uncertainty weighed on market sentiment and investors remain cautious. The CSI 300 faces resistance of the upper gap at ~3,856, and our conviction will increase if the index can break through it on increased volume. The lower gap at ~3,556 is the next level of support. Economic data showed improvement in industrial companies’ year-over-year profit growth in May, a sign that China’s economy is gradually stabilizing. Trade remains a big uncertainty, so investors are advised to stay patient and gradually buy actionable growth ideas as they break out from sound bases or the 50-DMA level. As the market enters the earnings preannouncement season, investors should watch ideas with high or better-than-expected earnings growth.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq closed slightly lower this week, but both continue to hold trend above all major moving averages. The 21- DMA has risen above the 50-DMA on both indices, now acting as our primary level of support. Resistance is all-time highs on the S&P 500 at 2,964, while resistance on the Nasdaq is the June 20 intraday high of 8,088. Distribution remains low at one day on the S&P 500 and two on the Nasdaq.
Market View
Strategy View
The Global Index (VT) is back above the 50-DMA for the first time in six weeks.
Market conditions are skewed positive. The 50-50 market direction indicator turned positive two weeks ago and
now more than 75% of global markets are in a Confirmed Uptrend. Generally higher conviction at 70%+.
• While the U.S. and mostly other small markets ( Australia/N.Z., Greece, Poland, Russia ) were the leaders
through last week, we had several major upgrades this week. On the DM side, there were follow-through
days in the U.K., Japan, and Hong Kong, among several others; and on the EM side, there were follow-
through days in Brazil and Taiwan.
The U.S. market had a typical pullback after a larger-than-normal leg higher through April. The first follow-
through day is working (historical success rate of ~55% on the first try after pullback from highs).
• Number of U.S. Focus List stocks back well above long-term average of 50, at 64 currently.
Number of weekly breakouts in the U.S., developed, and emerging all back to normal or above normal levels.
Global themes with most breadth in leadership:
• U.S.: payments/financial services, software, med-tech, aerospace/defense
• Developed ex-U.S.: chemicals, financial services, software, aerospace/defense, food/beverages, med-
tech
• Emerging ex-China: banks, consumer loans, real estate development, telecom, apparel/consumer, min-
ing
• China: banks, food/food service/alcohol, medical service, construction equipment
• Frontier: banks, telecom, cement, retail
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 made a new all-time high this week, while the Nasdaq regained its 50-DMA and is now trading less than 2% off all-time highs. The 21-DMA on both indices is set to cross above the 50-DMA and will take over as our primary level of near-term support next week. The distribution day count remains at zero.
European Focus
On Thursday, the Stoxx 600 closed 2% above last Friday’s close and is in a Confirmed Uptrend. During the week, we moved the Stoxx 600, the U.K., Italy, Portugal, Spain, and Belgium to a Confirmed Uptrend from a Rally Attempt. Of the 17 indices we cover, 11 are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, and two are in a Rally Attempt.
Market View
Strategy View
We are more positive given that a majority of global markets are back in an Uptrend, but would like to see the proportion rise to 70%+ for more confidence.
Global indices (Total World-VT, Nasdaq-0NDQC, iShares Developed-EFA, iShares Emerging-EEM, CSI 300-0CHSS300) have all bounced, but are still just in the middle of two-month ranges, at best, and volume to the upside on the recent bounce has been generally lackluster.
For the time being, focus on stocks that are part of broader working themes (we used groups with outsized proportion of stocks within 5–10% of highs to determine working themes), including:
Global utilities, segments of software in developed markets (U.S., France, Australia), payments/financial services globally, U.S. aerospace and defense, U.S./Europe med-tech, APAC real estate development, emerging market banks, emerging market telecoms, and China financials, food/food services, and medical services. Areas of consistent weakness include global autos/parts and steel, and developed market banks.
