Shanghai: SSE Composite Index (.SSEC) stock market about to change tides

Shanghai: SSE Composite Index (.SSEC) stock market about to change tides

Shanghai: SSE Composite Index (.SSEC) stock market about to change tides

For the past year, Chinese stocks have become intrinsically tied to the ebb and flow of the Washington and Beijing trade war rhetoric, however, certain indicators measuring the financial health of the market are beginning to warn of further trouble. 

While the CSI 300 – including Shanghai- and Shenzhen-listed stocks – has soared more than 29% since the start of the year only roughly a third of the 300 companies listed have this year outperformed the gauge– the smallest in any rally since 2009 – according to data compiled by Bloomberg. In comparison, about half of the companies listed on the S&P 500 and the Stoxx Europe 600 indices have outperformed the gauge this year.

The CSI 300 has a YTD return of 30% and, according to Bloomberg, roughly 10 stocks within the index account for half of the returns –– such as mega cap stocks like Kweichow Moutai and Ping An Insurance which accounted for 10.3% and 13.5% of index gains respectively.

The concentration is led by overseas investors choosing to focus on specific mega caps. But with so few stocks underpinning the rally, this increases risk of a reversal in the near-term, Goldman Sachs strategists wrote in a note last week.

Despite economic growth continuing to slow, there is still hope that stocks could be buoyed next month with the CSI 300 index climbing 1.9% since the end of August, as of Wednesday afternoon.

China Development Bank Securities analyst Sun Zheng told Bloomberg that there could be some potential triggers at the start of the quarterly earnings season in October, and possible further signals of monetary policy from the central bank.

For Shayne Heffernan, CEO and Founder of Heffx, investors will remain undeterred and continue to chase this year’s stock market favourites such as 5G developers WUS Printed Circuit Kunshan and Shennan Circuits, whose stock prices have more than doubled this year. “There are very limited choices in the market.”

Technical Indicators

Overall, the bias in prices is: Sideways.

By the way, prices are vulnerable to a correction towards 2,943.41.

The projected upper bound is: 3,029.13.

The projected lower bound is: 2,882.45.

The projected closing price is: 2,955.79.

Candlesticks

A black body occurred (because prices closed lower 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 29 white candles and 21 black candles for a net of 8 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 24.0770. This is not an overbought or oversold reading. The last signal was a sell 7 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 49.59. 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 6 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 -152.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 8 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 sell 4 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed down -29.908 at 2,955.433. Volume was 9% below average (neutral) and Bollinger Bands were 12% narrower than normal.

Open     High      Low     Close     Volume___
2,977.6672,977.6672,955.4332,955.43316,854,313,984
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 2,995.82 2,912.23 2,876.61
Volatility: 14 16 24
Volume: 18,854,909,952 17,639,043,072 22,961,428,480

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 2.7% above 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 22 periods.

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