Shanghai: SSE Composite Index (.SSEC) readies cushion for virus shock when markets re-open
China’s central bank announced plans Sunday to inject 1.2 trillion yuan ($173 billion) into the economy to cushion the shock to financial markets from the outbreak of a new virus when trading resumes on Monday after a prolonged Lunar New Year holiday.
The People’s Bank of China announced several measures over the weekend aimed at stabilizing the economy as the impact of the virus spreads with cancelled flights, stepped up quarantines and other controls.
Beijing extended the usual week-long holiday by three days but markets are due to reopen Monday and many expect they will drop sharply. Elsewhere in the region. worries over the potential harm to businesses and trade from the outbreak have triggered wide swings in share prices.
On Friday, jitters over the virus caused share prices to plunge.
The central bank statement issued Sunday said the open market operation was aimed at ensuring sufficient liquidity.
In a separate statement Saturday, the PBOC said that while markets would reopen, financial institutions should follow local quarantine regulations and try to minimize gatherings to reduce risks of spreading the virus, which has infected more than 14,000 people and killed more than 300.
That includes allowing rotating shifts, working online from home and other strategies, it said.
Regulators have also urged banks and other financial institutions to boost lending and avoid calling in debts in areas severely affected by the pandemic.
Some cities, particularly the central Chinese city Wuhan where the disease first surfaced, and nearby cities, are still in lockdown. Shanghai authorities extended the Lunar New Year holiday until Feb. 9. Universities remain closed for now.
Mainland China’s main share benchmark, the Shanghai Composite index, sank 2.8% to 2,976.53 on Jan. 23, its last day of trading before the Lunar New Year.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 3,048.02.
The projected lower bound is: 2,907.89.
The projected closing price is: 2,977.95.
A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 26.6108. This is not an overbought or oversold reading. The last signal was a buy 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 38.69. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 7 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -288.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 11 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 5 period(s) ago.
Rex Takasugi – TD Profile
SSE COMPOSITE closed down -84.226 at 2,976.528. Volume was 53% above average (neutral) and Bollinger Bands were 3% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 3,073.95 2,984.93 2,966.44
Volatility: 19 15 19
Volume: 21,889,701,888 19,339,288,576 20,027,449,344
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
SSE COMPOSITE is currently 0.3% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect moderate flows of volume into .SSEC (mildly bullish). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 29 periods.