Chart of the day - CHN.cash (15.11.2023)

Indexes in the European market extend the upward wave from yesterday's U.S. session and the earlier Asian session, which was dominated by gains in Chinese indices. The Hang Seng Index posted a nearly 3.2% rally in response to a general improvement in risk sentiment, the prospect of economic stimulus, as reported yesterday by Bloomberg, and the release of important macro data from the Chinese economy. A higher retail sales reading from China was in the market's spotlight, signalling stronger than expected consumers (7.6% y/y growth).

Hang Seng (CHN.cash) futures are up nearly 1.5% today. It seems that in view of overbought levels on Wall Street, where the S&P 500 index rose yesterday for the 11th session in a row, notching a record streak since 2021, emerging markets, including Chinese indices, may see elevated volatility in the near term. Today, the important data to which the market may react will be the US retail sales data (1:30 AM GMT) - a potentially disappointing lower report may suggest that consumers are weakening faster than the market expects. This could serve as a cautionary tale for an equity market 'enjoying' lower inflation readings and the prospect of an end to the Fed's rate hike cycle.

Yesterday, Bloomberg cited anonymous sources and reported on a planned $137 billion stimulus package for the Chinese economy. The Bank of China is to ultimately implement the funds into the economy in stages through banks, with the money eventually going to households, where it is to be earmarked for home purchases, in an effort to avoid a deeper real estate crisis. Officials according to Bloomberg are considering various options, including so-called pledged supplementary loans and special loans, and the Chinese government may take the first step in this direction later this month. Meanwhile, China's industrial production rose 4.6% y/y in October, compared to 4.5% forecast and 4.5% previously. Investment in metropolitan areas pointed to a 2.9% y/y increase, below forecasts of 3.1% and the previous 3.1% reading. The unemployment rate was 5%, in line with expectations and the previous reading, and retail sales rose 7.6% y/y against estimates of 7% and 5.5% previously, signaling higher consumption and demand in the economy.

CHN.cash (M30) chart

Looking at the CHN.cash index quotes, we see a bullish formation resembling an inverted head and shoulders pattern (RGR). Significantly, this formation was 'printed' at the level of annual minima at 5800 - 6000 points level. The bulls managed to break above the 'neckline', at the psychologically significant level of 6000 points, coinciding with the 61.8 Fibonacci retracement of the upward wave from the fall of 2022. However, looking at the reaction of the MACD from the current levels of 6200 points, a short term correction is not excluded with the RSI indicator reaching 76 points signals overbought level. At the same time, if the bulls are able to maintain momentum, the index could head towards the 38.2 Fibonacci retracement near 6700 points in the medium term.

Source: xStation5