Rising Covid-19 cases were followed by stimulus packages from countries all over the world to protect their respective economies. Markets have overall reacted well to the stimulus, and on Thursday’s close, the Stoxx 600 gained 9.67%. Today, markets are erasing some of these gains, and the Stoxx 600 is losing 3.76% after its first three-day rally since mid-February.
Tag: Rally Attempt
Market View
The U.S. market is now in a Rally Attempt. Indices declined for another week, however the Nasdaq (6,686) and S&P 500 (2,280) are slightly off lows for the third consecutive session, as the market status was moved to a Rally Attempt. If indices undercut recent lows, the status will be moved back to a Downtrend.
All 11 sectors declined for the week, led lower by Energy (-20%). The majority of sectors are bouncing around recent lows, led by poorly ranked industry groups (1=best, 197=worst). More than half of the 12 best performing groups for the week were ranked 103 or worse. Industry groups showing an improvement in rank or with RS lines at or near highs are primarily defensive in nature including Cleaning Products (CLX), Discount Retail (COST), Medical-Software (VEEV), Super Markets (KR), Water Utilities (AWR), Food (FDP), and Telecom (CCOI).
Despite the possibility of a follow-through day as early as next week, we maintain a very cautious and defensive approach. Indices remain near lows and low-quality stocks from poorly ranked industry groups are attempting to bounce higher. A lot of technical damage has occurred to stocks, and we believe it will take some time to repair. In the meantime, continue to monitor high relative strength quality stocks as they will be a valuable resource for fresh ideas when market conditions improve.
Market View
U.S. Market
The U.S. market remains in a Rally Attempt. The S&P 500 and Nasdaq have now held above the February 28
intraday low (S&P 500: 2,855; Nasdaq: 8,264) for six sessions, despite heavy selling to close the week. Monday
will mark day seven of the attempted rally with a follow-through day still needed to move to Confirmed Uptrend.
If these lows are undercut, however, the market status shifts back to a Downtrend and we again look for indices
to establish and hold above another new low.
Lagging sectors and industry groups broke through last week’s lows, while defensive-oriented sectors including
Utility, Consumer Staple, and Health Care held up best. The best performing groups over the last week include
Building Products/Services, Utilities, Food, Mining, Managed Care, and Telecom. The worst performing groups
included Oil & Gas, Leisure, Gaming, Lodging, Banks, and Airlines.
US Focus
The U.S. market remains in a Rally Attempt. The S&P 500 and Nasdaq have now held above the February 28 intraday low (S&P 500: 2,855; Nasdaq: 8,264) for six sessions, despite heavy selling to close the week. Monday will mark day seven of the attempted rally with a follow-through day still needed to move to Confirmed Uptrend. If these lows are undercut, however, the market status shifts back to a Downtrend and we again look for indices to establish and hold above another new low.
European Focus
On Thursday, the Stoxx 600 closed 0.32% lower and was down 0.08% from last Friday’s close. Today, the Stoxx 600 is again losing 0.18% after opening in the green. The spread of coronavirus remains a threat and theme for the global markets.
China A Shares
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.
China A Shares
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.
European Focus
On Thursday, the Stoxx 600 ended the day 4% above last Friday’s close and remained in a Confirmed Uptrend. Of the 17 indices we cover, 10 are in a Confirmed Uptrend, four are in an Uptrend Under Pressure, and three in a Rally Attempt.
European Focus
On Thursday, the Stoxx 600 closed 1.01% lower and was down 2% from last Friday’s close. Today, the Stoxx 600 is again losing 0.32% after opening in the green. The spread of coronavirus remains a threat and theme for the global markets.
European Focus
On Thursday, the Stoxx 600 closed 0.93% higher and was flat compared with last Friday’s close. Today, the Stoxx 600 is losing 0.94% as investors assess an escalation in the U.S.-Iran tensions.
