The U.S. market has been moved back to a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating
gains after gapping above resistance at the 50-DMA. To remain constructive, we would like to see the 50-DMA
serve as support as more high quality ideas emerge from bases. Currently both indices are less than 2% off alltime highs with five distribution days on the Nasdaq and three on the S&P 500.
Tag: Confirmed Uptrend
US Focus
The U.S. market has been moved back to a Confirmed Uptrend. The S&P 500 and Nasdaq are consolidating gains after gapping above resistance at the 50-DMA. To remain constructive, we would like to see the 50-DMA serve as support as more high-quality ideas emerge from bases. Currently both indices are less than 2% off all -time highs with five distribution days on Nasdaq and three on the S&P 500.
China A Shares
The CSI 300 dropped 0.6% for the week on slightly lower volume. The market remains in a Confirmed Uptrend with one distribution day. The Sino-U.S. trade war escalated this week and, though negotiations have resumed, the uncertainty still impacted market sentiment. We will be watching closely for trade news this weekend since new tariffs take effect September 1. We expect the CSI to continue consolidating around 50- and 100-DMA support; next support is at ~3,720. Short-term resistance lies at the upper gap of ~3,860. New policies to boost consumption, as well as the upcoming Mid-Autumn Festival and 70th National Day celebrations, are positive factors for the market. Investors are advised to stay patient and select quality growth ideas that have good earnings prospects and could benefit from these policies.
China A Shares
The CSI 300 rose 2.97% on increased volume for the week. We upgraded the market condition to a Confirmed Uptrend on Monday after the index surged 2.17% on the news of interest rate reform and the plan to build Shenzhen into socialist demonstration area. The short-term risk preference and market sentiment recovered under the stimuli of domestic policies, but we believe the market is still volatile and the Monday follow-through day may fail. The CSI 300 regained its 50-DMA and 100-DMA, which serve as the next levels of support. We see immediate resistance near 3,850 and the next resistance near 3,900. The market is still facing a lot of uncertainties in the near term, thus we advise investors to stay cautious and patient, taking a disciplined approach to selecting quality growth ideas that have strong relative strength and are not extended more than 5% above a pivot.
US Focus
The U.S. market is in an Uptrend Under Pressure. The S&P 500 and Nasdaq continue to whipsaw below 50-DMA resistance. Though the Nasdaq did stage a day-six follow-through on Tuesday, gains were immediately wiped out Wednesday with instant distribution. Further, few quality ideas have been set up technically to buy with the majority chopping around within consolidation. Our primary expectation is that the August 5 lows (S&P 500: 2,822; Nasdaq: 7,662) are undercut and we eventually test the 200-DMA. This would result in the market status being moved back to a Downtrend. We would change our current cautious outlook should indices rally strongly, close, and importantly hold above their respective 50-DMA. Should that occur, we would move the market status back to a Confirmed Uptrend.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending into higher highs with
support off their respective 10- and 21-DMA. Distribution stands at six days on the S&P 500 and four on the
Nasdaq, with one day set to expire on both indices next Tuesday. To remain positive, we would like to see near-
term support levels continue to hold and distribution begin to subside.
Leadership is broadening. The majority of leading ideas and industry groups are holding logical levels of sup-
port or hitting higher highs, while previously lagging industry groups have rallied sharply off lows. Technology,
Transportation, and Consumer Cyclical rallied more than 2% each this week, while three other sectors including
Financial rallied more than 1%. Utility and Energy are the only two sectors lagging, both trading right around
their respective 50-DMA. 74 of 197 (37%) O’Neil Industry Groups are trading within 5% of a 52-week high with
160 groups (81%) trading above the 50-DMA. 46 industry groups rallied by more than 3% this week.
The overall backdrop remains positive, despite the elevated distribution day count on the S&P 500. Continue to
add to leading ideas as they rally off moving average support or emerge from secondary entry points. Lock in
partial gains in ideas that have become too far extended from later stage bases and logical levels of support.
Continue to avoid lagging ideas trading below their respective 50- and/or 200-DMA.
China A Shares
The CSI 300 increased 1.3% for the week on lower volume and remains in a Confirmed Uptrend with three distribution days. Trading on the Nasdaq-style board enhanced activity in the technology sector and improved market sentiment and risk appetite. The market as a whole rebounded this week but volume remained low, indicating wait-and-see sentiment. The CSI 300 is 2.7% above its 100-DMA and 3.2% above its 50-DMA. Next support is at ~3,800 and ~3,700 and resistance is at ~3,900. China and the U.S. will have high-level face-to-face trade talks in Shanghai on July 30 and 31 for the first time since talks broke down in May, but no major breakthroughs are expected. In the near term, market focus shifted to the U.S. Federal Reserve meeting and domestic policy direction (the results of the July politburo). We believe that the index will continue sideways in a narrow range, and we suggest that investors focus on leading stocks that have broken out of patterns or key support levels on heavy volume.
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending into higher highs with support off their respective 10- and 21-DMA. Distribution stands at six days on the S&P 500 and four on the Nasdaq, with one day set to expire on both indices next Tuesday.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to hold near all-time
highs, consolidating the last two weeks of gains over the last several sessions. Distribution did rise to five days on
the S&P 500 (three in the last four sessions) and four on the Nasdaq, though one day is set to expire on the
Nasdaq at the end of next week. There will also be further expiration on both indices the week after next. Near-
term support remains the rising 21-DMA (S&P 500: 2,968; Nasdaq: 8,104).
Ten of 11 O’Neil sectors remain clearly above the 50-DMA, while Energy is trading right around that level after
falling ~3% this week. Breadth remains strong with ~80% of S&P 500 stocks above the 50-DMA and ~45%
trading within 5% of a 52-week high. Leading ideas continue to act well, with the majority holding trend despite
this week’s pullback.
China A Shares
The CSI 300 fell 0.02% for the week on slightly increased but still-below-average volume. The market remains in a Confirmed Uptrend with two distribution days. Recently released macro data was not as expected, and there is still the possibility of U.S.-China trade war tensions, leading to a strong wait-and-see market sentiment and continuous volatility. Interest rate cuts by several countries’ central banks boosted global capital markets. The CSI 300 is still weak, oscillating around ~3,800. We are looking for the index to hold support above the 100-DMA, near 3,796. Failure to hold this level would raise concern. The next support is the 50-DMA or the gap below (~3,715). Given that the market is waiting for the opening of Nasdaq-style tech board next Monday, we expect it to continue sideways. We advise investors to stay patient and focus on leading stocks that are trading constructively with a high probability of excellent Q2 earnings results.
