Stocks Up, Markets Finish Off May Positively

Summary of content for the week of May 28:

1. Week 21 major indexes performance;

2. Week 21 US sector indexes performance;

3.Major indexes weekly charts of support and resistance levels;

U.S

U.S major indexes finished up for the week ended May 28, bringing the broader SPX index to within 0.5% of the all-time intraday high it hit on May 7 and ended the month with a small gain, SPX added 1.16% for the week. Nasdaq(COMP) index performed best with 2.06% weekly gain and DJI added 0.94. U.S trading volumes were light ahead of long weekend as Monday May 31 is a holiday. Refer to major indexes weekly performance table below.

Major events happened during the period:

1.    Weekly jobless claims fell more than consensus expectation, to a new pandemic-era low of 406k. Positive for stocks. 

2.    Republicans proposed US$928 billion counteroffer to President Joe Biden’s latest proposal of US$1.7 trillion.

Within SPX 11 sectors, Consumer Discretionary(XLY) and Communication Services(XLC) performed best, Facebook and Google parent Alphabet helped communication services stocks outperform within the S&P 500, and a rebound in Tesla boosted consumer discretionary shares. Utilities (XLU) and Healthcare(XLV) lagged. Refer to below weekly sector indexes for details.

Technically, the three major indexes weekly charts remain in strong uptrend. Refer to below major indexes weekly charts.

China/HK

China SSE index rose strongly, SSE index posting best weekly gain in more than three months. In an effort to reduce financial risks, policymakers promised zero tolerance for commodity speculation and further cracked down on cryptocurrency mining.

Data shows funds flowing into China equities via China-HK Stock Connect hit US$3.4 billion on Wednesday, among the largest-ever daily net inflows. Mainland funds were active in buying HK listed blue chips as well such as HKEX(388hk) and tech giant Tencent(700hk).

Hang Seng Index gets overhaul: The .HSI index revamp first step will expand the benchmark from 55 to 58 names, with the addition of auto and battery maker BYD(1211hk); real estate Country Garden(2007hk) and solar panel glass maker Xinyi Solar(968hk) effective on Jun 7. The HSI will add five new stocks each quarter, expanding to 80 in total by mid-2022, when it will cover around 71% of the Hong Kong stock market (versus 57% today). The overhaul of the HSI, first announced in March, reflects the growing influence of China’s tech giants and a bid to increase the index’s relevance since its creation in 1969.

Both China SSE and .HSI indexes weekly charts are bullish, especially SSE index which is the best performer with 3.28% gain.

Singapore

STI index recorded its 2nd-week rebound streak, as the no. of Covid-19 cases appear to be stabilised over the past two weeks. Malaysia announced total nationwide lockdown from 1-14 as Covid-19 cases hit a new record, expected to have minimum impact on Singapore as the government already tightened up border control for all international travelers into Singapore.

STI weekly chart in range-bound, immediate resistance at 3237 recent high and major support at 3024.

Strengthen in Economic Data, Inflation Worries and Cut Asset Purchases

 Summary of content for the week of May 21:

1. Week 20 major indexes performance;

2. Week 20 US sector indexes performance;

3.Major indexes weekly charts of support and resistance levels;

U.S

U.S major indexes closed mixed for the week ended May 21, with the broader SPX index ending modestly lower for 2^nd week and the tech-heavy Nasdaq(COMP) index closed positive for the first week after three-week down. These mixed results likely reflect strength in the U.S. economy, as well as concerns about inflation and the timing of when the Fed might begin to rein in its accommodative policies.

Bitcoin- Bitcoin plunged more than 28% by closing for the week. Bitcoin had been under pressure after a series of tweets last week by billionaire Tesla (TSLA.O) CEO and cryptocurrency backer Elon Musk, reversed plans to accept bitcoin as payment for his electric vehicles.  

In addition, on Friday China cracked down on mining and trading of the largest cryptocurrency as part of ongoing efforts to prevent speculative and financial risks. Bitcoin price has almost been halved now from its peak last month.

Major events happened during the period:

1.    Fed hints it may discuss tapering of asset purchases as minutes from the FOMC meeting in Apr revealed. This is negative for stock market as it will reduce hot money in the markets. 

2.    Flash PMI readings in May shows strength in U.S economy, and inflationary pressure. Flash PMI for service sector climbing to record 70.1 from 64.7 in Apr. Manufacturing PMI advanced to 61.5 from 60.5 in Apr.

Within SPX 11 sectors,  Healthcare(XLV) and Real Estate(XLRE) posted strong gains. Energy(XLE) and Industrials(XLI) lost ground. Refer to below weekly sector indexes for details.

Technically, the three major indexes' weekly charts remain in strong uptrend. Refer to below major indexes weekly charts.

China/HK

On Friday, China SSE index gave back all its earlier gains in the week and closed flat. Hong Kong’s.HSI index on the other hand, rebounded for the week after three-week down, with the helping of tech stocks rebound, the HS Tech index recovered all its previous week losses, closed 6% up for the week.

Singapore

STI index rebounded and recovered about half of its previous week’s loss, closed above its 3100 technical support. Technical remain bullish as long the index can hold above its recent low 3024.

 

Inflation Worries, Resurging of COVID-19 Cases Drag Stocks Down

Summary of content for the week of May 14:

1. Week 19 major indexes performance;

2. Week 19 US sector indexes performance;

3.Major indexes weekly charts of support and resistance levels;

U.S

U.S major indexes lower for the week ended May 14, as investors confronted stark signs of higher inflation, but a late rally moderated the week’s declines. DJI and SPX slipped back from record highs and technology-heavy Nasdaq index is the weakest among all three, closed down for 3^rd straight week.

Weakness in Tesla weighed especially on consumer discretionary shares, and Elon Musk’s announcement that electric vehicle maker would no longer accept Bitcoin as payment because of its carbon footprint sparked a sell-off in the cryptocurrency.

Major events happened during the period:

1.    Core inflation sees biggest monthly jump since 1982. Released on Wed, core CPI(excluding food and energy) jumped by 0.9% in Apr, the most in nearly four decades and roughly triple consensus estimates. DJI reacted by having its worst since last Oct, SPX also had its worst day since Feb this year. Stocks recovered some momentum on Thu and Fri, seemingly helped by better weekly jobless claim data. 

2.    Fed stress inflation is likely to prove temporary and made repeated assurances that it would not prompt any sudden shift in monetary policy. The Fed is in a dilemma now as the U.S economy doesn’t look good as measured by both manufacturing and service PMI readings and its job market isn’t improving. (refer to previous week’s post)

IT and other growth-related stocks led the way to rebound on Thu and Fri after falling sharply in the first half of the week. On weekly basis, Consumer Staples( XLP) and Financials(XLF) underperformed, while Technology(XLK) and Consumer Discretionary(XLY) lagged. Refer to below SPX sector indexes weekly performance table.

Technically, the three major indexes weekly charts remain on strong uptrend. Refer to below major indexes weekly charts.

China/HK

Chinese stocks rose strongly for the week. The benchmark SSE Index gained 2.1%, was the best weekly performer in my major indexes table below.

Chinese technology stocks listed in HK continued under selling pressure this week as the authority’s regulation risk of antitrust still high on top Chinese tech companies such as Meituan 3690HK, Tencent 700HK etc. The technology index ETF- CSOP Hang Seng TECH Index ETF 3033HK, dropped to new multi-month low since last Nov. I believe it’s a good opportunity to consider those top players in tech, as the technology stocks will still be the key drivers in new economy transformation at all times.

Singapore

STI index had its worst weekly loss of 4.54% since last Mar when pandemic just breakout, as the government announced fresh lockdown rules on Friday to fight rising Covid-19 cases raised concerns about the mending economy. Technical, STI index has broken down 3100 support which is bearish, immediate next support at 3000 level.

Stocks End Higher, Despite Disappointing Jobs Report

Summary of content for the week of May 7:

1. Week 18 major indexes performance;

2. Week 18 US sector indexes performance;

3.Major indexes weekly charts of support and resistance levels;

U.S

U.S major indexes mixed for the week ended May 7, as DJI and SPX closed new highs, while the technology-heavy Nasdaq(COMP) recorded its worst weekly loss in two months. Refer to below weekly performance for major indexes.

Major events happened during the period:

1.    Nonfarm payroll reported on Friday shows jobs added by only 266k in Apr, much below the nearly 1million jobs widely expected. The much lower jobs number calm overheating worries, led Friday’s rally as investors think the economy was not growing as fast as some expected. 

2.    Unemployment rate ticked up to 6.1% from 6.0% in Apr. The stall in Apr confirms the Fed will keep its policy stimulus in place for some time to comes as it targets “broad-based and inclusive maximum employment.” 

3.    Earnings season continued to wind down over the week, with 442 of the SPX 500 companies expected to have reported 1Q results by the end of the week, according to data from Refinitiv. Earnings have generally beat estimates by a wide margin. However, it appears that earnings beats or misses do not have dramatic effects on stock prices.

Among SPX index sectors, Technology(XLK) underperformed, along with consumer discretionary(XLY), utilities(XLU), and real estate(XLRE) stocks, while energy(XLE) and financials(XLF) outperformed for 3th week in a row. Refer to below SPX sector indexes weekly performance table.

Technically, the three major indexes weekly charts remain in strong uptrend. Refer to below major indexes weekly charts.

China/HK

China's SSE index fell in a holiday-shortened week. Mainland markets reopened Thursday after being closed Monday through Wednesday for the Labor Day holiday.  Chinese star technology stocks listed in Hong Kong continued trading weak as U.S China tension rises on the technology front. Technically, both SSE and .HSI indexes still trapped within their three months price range, consolidation.

Singapore

STI index recovered most of its losses on last two trading days of the week, from early in the week as it hit a six-week low. Technical bullish bias with next target level at around 3300 level. 

Earning Reports Upbeat, Stocks Touch Record Highs

Summary of content for the week of Apr 30:

1. Week 17 major indexes performance;

2. Week 17 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

4. Major indexes monthly performance for Apr

U.S

U.S major indexes closed mixed for the week ended Apr 30, as SPX closed the week edged up a bit but Nasdaq(.COMP) and DJI closed edged down, modestly. Refer to below weekly performance for major indexes.

Major events happened during the period:

1.    Q1 GDP reported on Thursday shows the economy expanded at an annualized rate of 6.4% in the first quarter, supported by a healthy increase in government spending, up from 4.3% in the fourth quarter. GDP on track to reclaim its pre-pandemic peak.

Source:fred.stlouisfed.org

2.    Strong earnings report. A little more than half of the SPX companies that have reported earnings so far, 87% are beating estimates by a historically elevated 24% rate. Among the week's highlights were the impressive results from the largest five companies of the index (Apple, Microsoft, Amazon, Facebook and Alphabet) which continues to benefit from digitalization trends and more people spending more time at home. 

3.    Fed’s meeting on Tuesday and Wednesday. Powell promises rate increases are not on the horizon. Fed’s dovish tone helps moderate increase in yields.

One caveat: Stocks may start factor in all the good news, appears fatigued even with the strong earnings results. What would be the next events to push stocks higher? Stocks have already extended their gains as shown in the weekly charts below.

Among SPX 11 sectors, Energy(XLE) outperformed this week, and Technology(XLT) lagged. Refer to below SPY sectors weekly performance.

China/HK

China's SSE and HSI indexes recorded weekly losses as the government's continued crackdown on technolgy firms' dampened buying sentiment. China's top tech stocks listed in HK weighted down on the .HSI index weakness. Heavyweight such as Tencent(700hk), Baidu(988hk), JD(9618hk), Alibaba(9988hk), Kuaishou(1024hk), BYD(1211hk) Meituan(3690hk) etc all under selling pressure. 

Additionally, reports that a state-owned asset manager was selling positions in growth stocks and several state banks delaying the release of their 2020 financial results gave investors little incentive to buy ahead of a three-day Labour Day holiday.

Technically, both SSE and .HSI indexes are in sideway consolidation with bullish bias.

Singapore

STI index closed new high after a three-week sideway considation, pushed higher led by local banks. The biggest local bank DBS touched a high of 30.12 SGD in the week, boosted by its strong Q1 earnings. MKE raises it target price to 33.71 with a "BUY" rating. 

Technically, STI next target at around 3300 level.