Shanghai: SSE Composite Index (.SSEC) an inverted U.S. yield curve raised concerns about a possible recession
Asian shares fell on Tuesday as a relief rally petered out amid rising doubts over whether China and the United States will be able to resolve trade differences.
An inverted U.S. yield curve also raised concerns about a possible recession.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3 per cent as Chinese equity markets struggled to move out of negative territory.
Chinese blue-chip shares in Shenzhen and Shanghai were slightly weaker, and the benchmark Shanghai Composite index edged barely higher. Shares in Hong Kong lost 0.3 per cent.
Australia shares gave up 0.8 per cent and Seoul’s Kospi fell 0.6 per cent, while Japan’s Nikkei stock index was 1.3 per cent lower.
The temporary freeze on further hostilities in the trade war between the United States and China had sparked a global rally in equity markets on Monday, pushing MSCI’s all-country world index up 1.3 per cent.
But even before the trading day ended, major U.S. indexes pulled back from intraday highs as investors pondered unresolved issues between the two countries.
Already, there was confusion over when the 90-day period would start. A White House official said it started on Dec. 1. Earlier, White House economic adviser Larry Kudlow told reporters it would start on Jan. 1.
Moreover, none of the commitments that U.S. officials said had been given by China, including reducing its 40 per cent tariffs on autos, were agreed to in writing and specifics had yet to be hammered out.
Adding to worries over the outlook for the global economy, the yield curve between U.S. three-year and five-year notes, and between two-year and five-year paper inverted on Monday – the first parts of the Treasury yield curve to invert since the financial crisis, excluding very short-dated debt.
Analysts expect an inversion of the two-year, 10-year yield curve – seen as a predictor of a U.S. recession – to follow suit.
On Tuesday, the yield on benchmark 10-year Treasury notes fell to 2.9407 per cent compared with its U.S. close of 2.991 per cent on Monday. The two-year yield also fell, but by a narrower margin, touching 2.8028 per cent compared with a U.S. close of 2.833 per cent.
That put the spread between 10-year and two-year Treasuries at less than 14 basis points, its flattest level since July 2007.
As the dollar weakened, China’s yuan continued to surge. Since Friday, it has added more than 1,000 pips against the greenback, reaching 6.8545 on Tuesday morning. At 0327 GMT, it was trading at 6.8613 to the dollar.
Federal Reserve Chairman Jerome Powell was scheduled to testify on Wednesday to a congressional Joint Economic Committee, but the hearing was postponed because of a national day of mourning for U.S. President George H.W. Bush, who died on Friday.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 2,698.52.
The projected upper bound is: 2,799.78.
The projected lower bound is: 2,532.70.
The projected closing price is: 2,666.24.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
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 85.8703. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 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 55.23. 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 32 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 56. This is not a topping or bottoming area. The last signal was a buy 4 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 buy 0 period(s) ago.
Rex Takasugi – TD Profile
SSE COMPOSITE closed up 11.160 at 2,665.958. Volume was 15% above average (neutral) and Bollinger Bands were 29% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 2,610.50 2,643.93 2,912.91
Volatility: 25 32 25
Volume: 15,992,338,432 16,410,466,304 14,698,256,384
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 8.5% below its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. 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 13 periods.