Shanghai: SSE Composite Index (.SSEC) cheaper valuations help, along with expected policy support

Shanghai: SSE Composite Index (.SSEC) cheaper valuations help, along with expected policy support

Shanghai: SSE Composite Index (.SSEC) cheaper valuations help, along with expected policy support

After vastly underperforming their American counterparts during the trade-war battles last year, China’s domestic shares are bearing up with a lot less relative damage this time around.

Since a near-6% mauling on May 6, a day after President Donald Trump’s tweeted pledge to step up tariffs on Chinese imports, the Shanghai Composite Index has even outperformed the S&P 500 Index. For the month of May, the two are roughly equal, with China’s onshore gauge slightly worse in dollar terms.

That’s a big change from last summer, when Trump tweeted that “our markets are surging, theirs are collapsing.”

Different This Time

IndexMay 2019June-December 2018
S&P 500 Index-6.58%-9.91%
Shanghai Composite-5.84%-18.08%
Shanghai Composite in dollars-8.16%-23.81%

“There seems to be this zone of relative stability in Chinese shares for a number of reasons, including inviting valuations,” said Daniel Xu, a managing partner at Beijing Eastern Smart Rock Asset Management Co. in Beijing. “There could be — more importantly — non-market forces at play,” he said, with Chinese officials eager for stability in equities in the run-up to the launch of a Nasdaq-style technology-sector board.

Chinese stocks got walloped in mid-June 2018, when Trump put China on notice he was proceeding with tariffs on $50 billion of imports and would keep going from there if needed. The Shanghai Composite entered a bear market later that month, vastly underperforming the U.S., and it lost ground most months for the rest of the year.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 2,952.86.

The projected upper bound is: 3,021.42.

The projected lower bound is: 2,750.71.

The projected closing price is: 2,886.06.

Candlesticks

A black body occurred (because prices closed lower 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 26 white candles and 24 black candles for a net of 2 white candles.

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 58.0355. This is not an overbought or oversold reading. The last signal was a sell 11 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 41.92. 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 16 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 -2. This is not a topping or bottoming area. The last signal was a buy 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 5 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed down -8.615 at 2,890.081. Volume was 28% below average (neutral) and Bollinger Bands were 66% narrower than normal.

Open High Low Close Volume___
2,901.7422,920.8292,875.9022,890.08121,594,355,712

Technical Outlook
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 2,891.48 3,048.16 2,777.49
Volatility: 15 28 27
Volume: 20,118,829,056 29,988,433,920 21,341,001,728

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 is currently 4.1% above its 200-period moving average and is in an downward 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 bearish on .SSEC and have had this outlook for the last 24 periods.

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