Shanghai: SSE Composite Index (.SSEC) trade war with the US, appears to be easing

Shanghai: SSE Composite Index (.SSEC) trade war with the US, appears to be easing

Shanghai: SSE Composite Index (.SSEC) trade war with the US, appears to be easing

China’s stock market could bounce back and reverse its year-long lackluster performance in 2019, as problems that rattled investors’ confidence, including small and medium-sized companies’ financing difficulties and the lingering trade war with the US, appear to be easing, analysts said. 

Last week, China’s benchmark Shanghai Composite Index which recently touched a more than four-year low, caused by country’s dismal economic data. 

But the index edged up on Friday and closed at 2,514.87 points, up from the 2,465.29 points on Monday’s closing, after Chinese policymakers said on Friday that it would cut banks’ reserve requirement ratio, unleashing 1.5 trillion yuan ($218.46 million) in liquidity to increase loan funding sources to small, micro and private businesses. 

Boosted by the policy, China’s stocks all closed higher last week, with the blue-chip CSI300 index and Shenzhen Component Index rallying 2.40 percent and 2.76 percent, respectively, on Friday. 

“I’m expecting that the stimulating effect of new policy, which aims to address the financing woes of small- and medium-sized enterprises, will last for some time and bolster the market’s confidence this week,” She Minhua, an analyst at Zhong De Securities, told the Global Times over the weekend. She said she is holding an optimistic attitude towards the A-share market this year as the valuations of most shares have already reached a base. 

In addition, China’s recent policies towards cutting personal income tax and reducing companies’ tax burdens could also spur domestic consumption and production, which – based on a report by Morgan Stanley – is estimated to pull up the GDP growth rate for 2019 by about 0.8 percentage points, dispelling concerns about China’s economic downward pressure.

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 2,614.71.

The projected upper bound is: 2,600.26.

The projected lower bound is: 2,425.94.

The projected closing price is: 2,513.10.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black 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 37.5968. This is not an overbought or oversold reading. The last signal was a buy 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 43.49. 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 53 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 -60. This is not a topping or bottoming area. The last signal was a buy 1 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 13 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 50.505 at 2,514.868. Volume was 19% above average (neutral) and Bollinger Bands were 3% wider than normal.

Open High Low Close Volume___
2,446.0192,515.3162,440.9062,514.86816,887,767,040

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

Moving Averages: 10-period 50-period 200-period
Close: 2,500.41 2,594.32 2,837.76
Volatility: 17 21 24
Volume: 12,409,070,592 15,667,187,712 14,138,020,864

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 11.4% below its 200-period moving average and is in an downward trend. Volatility is low as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of .SSEC (mildly bearish). Our trend forecasting oscillators are currently bearish on .SSEC and have had this outlook for the last 16 periods.

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