Shanghai: SSE Composite Index (.SSEC) stocks advanced as traders looked past data showing the economy contracted

Shanghai: SSE Composite Index (.SSEC) dull before the data release

China’s stocks advanced as traders looked past data showing the economy contracted for the first time since at least 1992.

The Shanghai Composite Index was up 0.7% at 2:21 p.m. local time, with a broad range of shares climbing. The yuan traded little changed after strengthening as much as 0.2%. The Hang Seng Index rose 2.1% in Hong Kong.

Gross domestic product shrank 6.8% in the first quarter from a year ago, the worst performance since at least 1992 when official releases of quarterly GDP started, missing the consensus forecast of a 6% drop. Factory output fell 1.1% in March, retail sales slid 15.8%, while investment decreased 16.1% in the first three months of the year.

China’s markets had turned dull before the data release, with the offshore yuan and the Shanghai equity benchmark both trading near their 30-day average

So far the Chinese authorities have been relatively restrained in providing stimulus to offset the impact of the pandemic, especially compared with central banks in the U.S and Europe. The People’s Bank of China refrained from offering one-year medium-term loans Friday even as 200 billion yuan ($28 billion) of the funds mature.

China’s central bank had already injected a net 100 billion yuan via the lending facility on Wednesday, while cutting the rate it charges on the loans to 2.95% from 3.15%. The reduction was expected as the central bank already trimmed costs on 7-day market operations in late March and the interest rates tend to move in tandem.

Local officials’ actions may be hampered by concern that additional stimulus will flow into speculative activities and fuel unsustainable debt, rather than aid productive parts of the economy.

Technical Indicators

Overall, the bias in prices is: Downwards.

The projected upper bound is: 2,966.75.

The projected lower bound is: 2,709.12.

The projected closing price is: 2,837.93.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 4 rising windows in the last 50 candles–this makes the current rising window even more bullish.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 74.1449. This is not an overbought or oversold reading. The last signal was a sell 4 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 52.48. 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 buy 51 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 111.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 13 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 18.559 at 2,838.494. Volume was 8% below average (neutral) and Bollinger Bands were 37% narrower than normal.

Open High Low Close Volume___
2,835.5582,854.9602,830.0222,838.49424,573,675,520
Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 2,810.26 2,873.98 2,929.31
Volatility: 18 29 23
Volume: 22,203,734,016 29,951,741,952 21,009,057,792

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.

Summary

SSE COMPOSITE gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
SSE COMPOSITE is currently 3.1% below its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect volume flowing into and out of .SSEC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .SSEC and have had this outlook for the last 0 periods.

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