Market Commentary - For the week ending 01 March 2024

Market Commentary (Hong Kong)

For the week ending 01 March 2024

Gold closed in the black at $2082.65 per ounce against the USD for the first time this year. Prominently this is also the highest end-of-week close for all time. Both WTI and Brent Crude made new year-to-date highs.

●    The Italian government reached out to BYD in its effort to attract a second car manufacturer in the country. The Industry Minister also talked to other car makers including Tesla.
●    China Financial Futures Exchange high frequency trader Shanghai Weiwan Fund Management from stock index futures trading for twelve months and confiscated 8.9 million yuan in illegal gains.
●    China’s NEV price war heats map as Tesla introduced incentives including insurance subsidies to stimulate sales.

Hang Seng Index closed the week at 16589, down 136 points or 0.82%. Based on this week’s candlestick, the index appears to be trapped between the 100-Day SMA overhead (red) and the 10-Day SMA below (blue). This is a headwater setup where the index is trapped between two flows. Until a clear outcome is achieved, the index could continue to consolidate. Until all of the moving averages reverse i.e. to perform golden cross, the longer term indicators are still in charge. In conjunction with the long term trendline, long averages are still pointing downwards so this is a setup associated with further losses. No prominent bullish reversal pattern can be observed.

HSI weekly chart from 02 January 2023 to 01 March 2024 (Source: DLC.socgen.com)

Hang Seng Tech closed the week at 3488, up 88 points or 2.6%. The index is into its fourth bullish week and has cleared the 50-Day SMA. Below, the 10-Day SMA is following closely and could offer potential support. Two prominent channels can be observed in this weekly chart below and HSTech appears to be nearing the upper bounds of the smaller channel. Should HSTech also comply with the larger channel, there is a lot more room to the upside. However note that longer moving averages are still pointing down and in the absence of prominent reversal patterns, this is a setup that is still associated with further losses.

HSTech weekly chart from 02 January 2023 to 01 March 2024 (Source: DLC.socgen.com)

Nasdaq printed a new all-time-high while the Dow went sideways. Both indices continue to trade above their basket of moving averages. This is a setup associated with further gains.

The next FOMC meeting is scheduled on 20 March 2024.

Fed funds futures on rate hike probability by next Fed meeting as at this week’s close:

●    96.0% probability of no change |4.0% probability of 25 basis points cut

Fed funds futures on rate hike probability by next Fed meeting at last week’s close:

●    96.0% probability of no change |4.0% probability of 25 basis points cut

Probabilities on the CME Fedwatch Tool indicate no more rate hikes for this year but also indicate possibility for rates to stay at current level until March next year. Rates could hold at current level till March 2025. Probabilities predict a cumulative 150 basis point cut for the whole of 2024 and up to 200 basis points between now till March 2025.

Shanghai and Shenzhen closed up for the third consecutive week. Shanghai closed at 3027, up 22 points or 0.74%. Shenzhen closed at 9435, up 365 points or 4.03%. Shanghai is now up 1.75% year-to-date while Shenzhen remains in the red. Day-to-day, the indices are now consolidating sideways so the market is probably looking forward to the ‘Two Sessions’  starting on 05 March to give direction. Despite the market rising strongly, no prominent reversal pattern can be observed. Since the current downtrend until January this year was deeply entrenched and as such the longer moving average indicators are still moving down rather steeply, the current setup for both indices are still associated with further losses.

Other news:

●    AIA, Cosco Ship Holding and Kuaishou bought back shares.
●    CNOOC printed a new 52-week high.
●    It is a news-busy week. The company announced a plan to increase share buyback amount. In addition, it is also looking for a location to set up manufacturing in Mexico. At the Geneva International Motor Show, the high-end Yangwang U8 SUV with emergency float feature and tank rotation wowed European visitors.
 

Technical observations

Lenovo Group 992.hk retraces back to 150-Day SMA, could be a reversal-pullback in the works..

Note chart features:

1. Lenovo trended up throughout 2023 bouncing off the 150-Day SMA (yellow) on several occasions. As can be seen from the first three boxes from the left, stock price rarely closed below the 150-Day and did so only rarely. However it has traded below this moving average the past four weeks and managed only to close above this week. It is possible that Lenovo could be reversing, that the moving averages could become resistance rather than support. A dead cross or series of dead crosses in the moving averages could appear later although this might not happen if price were to trade back above all of them.

2. Notwithstanding that price closed above $9 this week, the same level could become a potential resistance based on the number of swing highs and swing lows at or near this level.

Lenovo 992.hk weekly chart from 02 January 2023 to 01 March 2024. (Source: DLC.socgen.com)