Busiest week of Earnings, China’s Regulatory Crackdown on Mega-cap

Summary of content for the week of Jul 30:

1. Week 30 major indexes performance;

2. Week 30 US sector indexes performance;

3. Major indexes monthly performance for Jul

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

U.S

For the week end of Jul 30, also its final session of July, U.S three major indexes finished with modest losses. It’s the busiest week of corporate earnings reports, economics data, Fed meeting and China’s regulatory crackdown led to a selloff in Chinese equities. There was a lot of push and pull, stocks finished lower but still near all-time highs. Refer to major indexes weekly and monthly performance table below. 

With the 4.3% and 5% weekly drop for SSE and .HSI index, they gave back all their year-to-date(YTD) gains and went underwater by July. SSE lost 5.4% and .HSI lost 10% in the month, while SPX was the best performer with 2.3% gains. Refer to below major indexes monthly performance for July.

Major events happened in the week:

-U.S initial estimate of 2Q GDP reported an increase of 6.5%, much below the 8.5% estimate. Nevertheless, it was the 2^nd fastest pace of growth since 2013. Many analysts pointed to lingering supply chain problems as preventing even stronger growth. U.S GDP has now 0.8% above its 2019 peak before the Covid-19 pandemic outbreak.

2.    -Consumer spending which is about 70% of the GDP, was stronger than expected at 11.8% growth. Good news. 

3.    - Highly anticipated earnings reports from mega-cap techs were solid but their share prices excluding Google, declined. Amazon, Apple, Google, Microsoft and Facebook, which together make up 22.5% of the S &P 500, on average doubled their earnings from last year, according to analyst reports.

Amazon's miss on revenue weighed heavily on its shares, as well as the Consumer Discretionary sector(XLY), which was the worst sector in SPX. Energy(XLE) and Materials(XLB) outperformed. Refer to SPX sector indexes weekly performance below.

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

China/HK

Mainland China stocks slumped after a regulator overhaul of the for-profit education sector proved to be much tougher than investors had expected, and fears of heightened government oversight spilled into Chinese technology, health care, and property stocks.

Both SSE and .HSI indexes dived underwater YTD and were the worst two indexes in my first table of index performance in this post. For Jul, SSE index shed 5.4% and .HSI index declined 10%.

 Under the education policy changes, China banned after-school tutoring companies from being run for profit, raising capital or going public. Moreover, the companies are forbidden from offering school syllabus-related tutoring on weekends and vacation days and giving online lessons to children under six.

Toward the end of the week, stock markets stabilized as regulatory concerns appeared to ease, albeit without a relief rally. The People’s Bank of China pumped RMB 30 billion into the country’s financial system on both Thursday and Friday via seven-day reverse repurchase agreements, Bloomberg reported.

Technically, SSE index broke all major moving averages and trading below its 250dma which is bearish, immediate key technical support at 3330 which it bounced back after Wednesday’s selloff.

For .HSI index, it has tested its 61.8% Fibonacci retracement level at 25000 and bounced back, immediate key technical support level to watch is 25000 level. Refer to its weekly chart below. 

Singapore

STI index was the only index that closed positive for the week, it edged higher for five consecutive week in a row. The index appears very resilient and consolidated in a tight range over past two months. Immediate resistance at 3194 recent high and major support at 3104 recent low.