On Thursday, the Stoxx 600 ended the day 0.25% below last Friday’s close and is in a Confirmed Uptrend. During the week, we downgraded Spain to an Uptrend Under Pressure after it slipped below its 50-DMA. Of the 17 indices we cover, 15 are in a Confirmed Uptrend, one is in an Uptrend Under Pressure, and one is in a Rally Attempt.
Tag: Confirmed Uptrend
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to display constructive
technical action, consolidating near all-time highs with just one distribution day each. Support along the 21- and
50-DMA continues to rise toward current prices.
China A Shares
The CSI 300 rose 0.5% for the week on increased volume and remains in a Confirmed Uptrend with three distribution days. The market is in a weak rally, boosted by a surprising rate cut to mediumterm lending facilities and new signs of progress on the Sino-U.S. trade deal. The CSI 300 tested the high of its previous rally (~4,000) but retreated due to uncertainty surrounding the tariff rollback. Recent disappointing economic data also deflated market confidence. Unless a significant catalyst emerges, we expect the index to continue consolidating around consistent resistance at 4,000. We hope it holds above Monday’s gap (~3,964), which serves as immediate support. The next strong support is at the 50-DMA. We remain cautiously optimistic. Investors are advised to stay patient and focus on selecting stocks that have recently broken out with strong fundamentals. Keep an eye on key economic and financial data to be released next week, including October CPI/PPI, industrial value added, and fixed asset investment growth
US Focus
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to display constructive technical action, consolidating near all-time highs with just one distribution day each. Support along the 21- and 50-DMA continues to rise toward current prices.
European Focus
On Thursday, the Stoxx 600 was up 0.37% for the fifth consecutive day. Compared with last Friday’s close, the index was up 1.8% through Thursday. Today, the index was trading slightly lower than yesterday’s close.
China A Shares
The CSI 300 gained 1.43% for the week on higher volume. The market remains in a Confirmed Uptrend with four distribution days. The block-chain stimuli did not last long and market sentiment was still impacted by increased downward pressure on the economy. China’s manufacturing PMI declined to 49.3% in October, the sixth straight month that factory activities shrank. As Q3 earnings season ends, we expect market volatility to subside in the near term. The decreasing distribution day count has also boosted our conviction. We are cautiously optimistic and expect the CSI 300 to continue trading sideways above its 50-DMA, which serves as strong support. We look for the next resistance at previous highs of ~3,980. Investors are advised to stay patient and focus on ideas that have recently broken out with strong fundamentals.
US Focus
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq are trading at all-time highs after clearing above multiple levels of resistance throughout the week. On Friday, the S&P 500 cleared above longer-term resistance along its weekly upper channel line. Going forward, we will be looking for indices to consolidate gains constructively, avoiding any big pick up in distribution, while support along the 21- and 50-DMA catches up to current prices.
European Focus
On Thursday, the Stoxx 600 ended the day 0.32% below last Friday’s close and is in a Confirmed Uptrend. During the week, we upgraded Switzerland and Luxembourg to a Confirmed Uptrend after they breached their previous rally highs. Of the 17 indices we cover, 15 are in a Confirmed Uptrend, one is in an Uptrend Under Pressure, and one is in a Rally Attempt.
China A Shares
The CSI 300 rose 0.7% for the week on lower volume and remains in a Confirmed Uptrend with six distribution days. The market is struggling and risk preference remains low. As Sino-U.S. trade tensions ease and the market gradually reaches a consensus about economic slowdown, Q3 earnings have come into focus. Ideas that reported stronger-than-expected earnings generally outperformed its index or sector, such as Focus List name Jiangsu Hengrui Medicine (JHM.CN, 600276.CH) and Luxshare Precision Industry (SLP.CN, 002475.CH), not on our Focus List. As the market enters the final earnings week, we advise focusing on individual ideas with strong earnings performance and less on index direction. We see the CSI 300’s next immediate support at the 50-DMA with strong resistance at ~3,980. With the important party meeting next week, we will watch for any favorable signals. Investors are advised to stay patient.
China A Shares
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 total 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-than-expected 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. We continue to recommend a selective approach to increasing risk while staying cautious. Earnings are the key catalyst in individual ideas, therefore investors are advised to focus on stocks whose earnings may beat expectations. Avoid chasing highs.
