Shanghai: SSE Composite Index (.SSEC) shares inch higher as China cuts taxes

Shanghai: SSE Composite Index (.SSEC) shares inch higher as China cuts taxes

Shanghai: SSE Composite Index (.SSEC) shares inch higher as China cuts taxes

Shanghai stocks edged higher on Tuesday after the Chinese government vowed to cut taxes and increase public expenditure to prop up slowing economic growth.

The Shanghai Composite index was up 0.1 percent at 3,031 points, while the blue-chip CSI300 index was close to flat.

The Chinese government plans to cut nearly 2 trillion yuan ($298.31 billion) in taxes and fees for companies, Chinese Premier Li Keqiang said at the National People’s Congress on Tuesday, noting that fiscal policy will become “more forceful”.

The special bond issuance quota for local governments, a key source for infrastructure investment, has been set at 2.15 trillion yuan, the finance ministry said in a report on Tuesday. The quota was set at 1.35 trillion yuan last year.

The policies emerged as China experienced its slowest growth in decades. The government is targeting economic growth of 6.0 to 6.5 percent in 2019, Li said, less than the 6.6 percent gross domestic product growth reported last year.

Market reaction was muted because “none of the targets come as a major surprise and most had been leaked over the past few months,” Sue Trinh, a FX strategist at RBC Capital Markets, wrote in a memo on Tuesday.

Reports suggesting that Beijing and Washington were closing in on a trade agreement sent Chinese stocks to their near nine-month highs on Monday.

Profit-taking was expected to follow such a rally, Kaiyuan Securities analyst Wei Yi wrote in a note. “There is a lot of leveraged money here,” said Wei. “Whenever they see profit mid-trade, they would… sell shares in the (leverage) financed accounts to lower the risk of leverage.”

So far this year, the Shanghai stock index is up 21.5 percent. The Shanghai stock index is above both its 50-day moving average and its 200-day moving average.

Overall, the bias in prices is: Upwards.

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

By the way, prices are vulnerable to a correction towards 2,763.58.

The projected upper bound is: 3,160.63.

The projected lower bound is: 2,966.28.

The projected closing price is: 3,063.46.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 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 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 78.9881. This is not an overbought or oversold reading. The last signal was a sell 1 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 83.22. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 8 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 103.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 20 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 36 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 26.671 at 3,054.247. Volume was 123% above average (neutral) and Bollinger Bands were 173% wider than normal.

Open High Low Close Volume___
3,019.8803,054.9623,009.4483,054.24742,414,252,032

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 2,919.07 2,646.74 2,751.61
Volatility: 32 22 25
Volume: 40,610,816,000 20,565,571,584 15,646,058,496

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 11.0% 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 30 periods. Our momentum oscillator is currently indicating that .SSEC is currently in an overbought condition. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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