CFD Indices – Wall Street Pressured By Worries Over US Debt Ceiling Vote

Market News

  • Stocks on Wall Street closed mixed on Tuesday, pressured by worries about U.S. lawmakers opposed to a deal to raise the $31.4 trillion debt ceiling, but supported by another surge in Nvidia shares that briefly lifted the chipmaker into the rare club of companies valued at $1 trillion.
  • On Tuesday, Republican House of Representatives Speaker McCarthy said the deal should be “easy” for Republicans to vote for and was likely to pass, but some right-wing Republicans said they opposed the bipartisan deal.
  • Treasuries rallied after the initial deal was struck, on the expectation a U.S. default would be averted, but the market remains skittish as once authorised to borrow the Treasury is likely to issue lots of debt to replenish its coffers.

Market Views

  • Asian markets slid toward a second month of losses in a row on Wednesday as weak Chinese factory activity fed growing doubts about the post-pandemic recovery in the world’s second biggest economy. Hang Seng index slumped 417 points and Nikkei 225 index dropped 435 points.
  • Data showed Chinese manufacturing activity contracted faster than expected this month on weakening demand, with the official manufacturing purchasing managers’ index down to 48.2 against a forecast of 49.4.



Dow Jones Index
(CFD Symbol: US30)

Trend:

Recommendation:

Last: 32,921

Target price:

Protective stop:

Outlook
The short rebound came to an end after the rally was capped by the 20EMA resistance point. We are likely to see price testing its previous low at 32,562. Stochastic remains weak and MACD remains bearish with both lines are heading lower.

Trading Idea
Sell 33,180 for 32,500 with a stop above 33,400.


Hang Seng Index
(CFD Symbol: HK50)

Trend:

Recommendation:

Last: 18,159

Target price:

Protective stop:

Outlook
Price continued its decline after breaking down from a sideway consolidation zone. We are likely to see price falling to the Fibonacci 62% correction point at 17,700 in the next couple of days. Stochastic is weak and MACD remains bearish.

Trading Idea.
Wait for better trading idea.


Nasdaq 100 Index
(CFD Symbol: USTec)

Trend:

Recommendation: Short @ 13,960

Last: 14,336

Target price: 13,250

Protective stop: 14,000 Triggered

Outlook
Price could have reached a possible price top at 14,528. A Doji candlestick pattern was formed last night. We are likely to see price retracing to the 20EMA at 13,800. Stochastic is at the overbought zone. MACD remains bullish but a bearish crossover is likely.

Trading Idea
Sell 13,960 for 13,250 with a stop above 14,000. Entry and stop were triggered on 29 May.



FTSE 100 Index
(CFD Symbol: UK100)

Trend:

Recommendation:

Last: 7503

Target price:

Protective stop:

Outlook
Price continues its downward momentum after as it breaks below its recent price low of 7552. We are likely to see price diving to 7202. Stochastic is very weak and MACD remains bearish with both its lines moving lower.

Trading Idea
Wait for better trading idea.

Trading Opportunity for China Internet and China EV.

Hong Kong market is bad. Hang Seng Index is below 18,800 and people are now saying maybe we test the 14597.31 low in Oct 2022. I recall Oct 2022 low was printed with:
1) fear of Mainland-Taiwan tension
2) President Xi announcing his new leadership team in Communist Party Congress
3) high inflation in US and Europe and US FED rate hikes
4) a cold winter with no gas in Europe

None of the above became a real issue and today, we are worry again(?):
a) US stock market correction. US S&P has been above 4,000 year-to-date despite Morgan Stanley US equity strategist Michael Wilson kept saying S&P could fall to 3,000.
https://www.cbsnews.com/news/morgan-stanley-stock-outlook-20-percent-drop/
b) Europe stock market correction. Eurostoxx 50 is up 16% in one year. N225 is up 15% in one year. EUR has strengthened against USD year to date and currently at 1.07 vs last year Sep low of 0.96. JPY has weakened from 128/130 to 140.
c) US Fed rate is at 5-5.25% and CPI is still going up. So rates may stay at this current level. This is a real issue and affects business that is leverage.
d) US Treasury yield curve is inverted and this predicts a recessionary future. 5% rate for 1 year or shorter. 3.7-4.3% for 2-30 years. It is inverted but not that inverted. CME FedWatch tool is implying 28% chance for Fed Rate to be at 3.75-4% in Jul 2024. This could make the yield curve flat. Plus US Treasury is not keen to pay high coupon for their long dated bonds.
https://www.ustreasuryyieldcurve.com/
e) US Debt Ceiling => technical default for a few days?
f) Hang Seng Index is down 7.3% in a year and many ex-HOT stocks testing Oct 2022 low

I would only worry about the last two items.
Short term volatility from (e) Debt Ceiling saga could indeed cause a roller coaster to stocks and bonds market. 3 potential actions:
i) Sell in May and Go Away. Buy back after the debt ceiling is lifted.
ii) Bargain hunt if S&P goes below 4,000
iii) be Warren Buffet and sit tight

Unrealised losses from (f) is really making investors sad. Alibaba, JD and Tencent have been getting cheaper since end of Jan (last rally) and many clients are stuck, running out of bullets to average down. Tencent has been paying special div through JD and Meituan shares to keep shareholders happy. Alibaba spin-off is likely to pay shares to shareholders as well. JD has not got much to pay its shareholders and it is down 42% year to date. Tencent is down 1.7% and Alibaba is down 11% year to date.

What to do? Well, the good news is that Alibaba, Tencent and JD still have a good business and they are profitable. So sit tight is an option.

China EV sector is a “polarised sector”. BYD +16.4% year to date, LI Auto +34.2%, Nio -20%, XPeng -19.5%. We would switch out of Nio and XPeng and buy BYD and LI. EV is a long term trend but not all players can survive. Aston Martin makes really nice cars but you may not want to be their shareholders

CFD Trading – Sell SIA (C6L.SGX) @ $6.35. Stop @ $6.55 and Target @ $6.02.

SIA   Stock Code C6L.SGX

Outlook

Price retraced after reaching its previous high for a second time, forming a potential double top reversal chart pattern. A bearish engulfing reversal candlestick pattern was formed yesterday. There is a potential divergence warning given from the RSI indicator that hints at possible price top. We are likely to see price having its price correction to S$6.02.

Strategy

$6.35                 Sell

$6.02                 Price Target

$6.55                 Risk Management Stop

3 weeks             Trade Duration

CFD Trading – Sell Keppel Corp (BN4.SGX) @ $6.34. Stop @ $6.50 and Target @ $5.97.

KEPPEL CORP   Stock Code BN4.SGX

Outlook

Price is having a price correction after reaching a price top at S$6.57. Price attempted to rebound but was capped by its 20MA resistance point. The RSI has given divergence warning and it is falling below its neutral level, hinting at more downside ahead. We are likely to see price continuing its downward strength to move lower.

Strategy                     

$6.34                 Sell

$5.97                 Price Target

$6.50                 Risk Management Stop

3 weeks              Trade Duration

CFD Indices – Nvidia Lead Wall Street Higher On Earning Beat

Market News

  • Wall Street ended sharply higher on Thursday after a blowout forecast from Nvidia sent the chipmaker’s stock soaring and fueled a rally in AI-related companies, while investors watched for signs of progress in U.S. debt ceiling talks.
  • Nvidia Corp soared 24% to a record high close after the world’s most valuable chipmaker forecast quarterly revenue 50% higher than estimates and said it was ramping up supply to meet demand for its artificial-intelligence (AI) chips.
  • U.S. President Joe Biden and Republican lawmaker Kevin McCarthy on Thursday were edging close to a deal, with the parties just $70 billion apart on discretionary spending, Reuters reported, citing a source familiar with the talks.

Market Views

  • Asia stocks were mixed on Friday, apart from standout gains in Japan, as an artificial intelligence rally took a breather and as time ticked out on high-stakes talks to avoid a U.S. debt default. Hang Seng index fell 369 points while Nikkei 225 index gained 190 points.
  • May data on Friday showed inflation slowing to 3.3% in Tokyo, a decent proxy for the nation, which means it’s been comfortably above the Bank of Japan’s 2% target for a year now.



Dow Jones Index
(CFD Symbol: US30)

Trend:

Recommendation:

Last: 32,720

Target price:

Protective stop:

Outlook
Price is currently sitting at its resistance-turned-support zone. A potential Doji candlestick pattern is formed at this support zone, hinting at possible rebound ahead. Stochastic is near to the oversold zone and MACD remains bearish.

Trading Idea
Wait for better trading idea.


Hang Seng Index
(CFD Symbol: HK50)

Trend:

Recommendation: Short @ 19,840

Last: 18,516

Target price: 18,850 Filled

Protective stop: 19,500

Outlook
Price has been diving for a fourth straight day after breaking out from a sideway consolidation zone. It is currently trading near to the Fibonacci 161% projection level and could be due for a short rebound. Stochastic is at the oversold zone but MACD remains bearish.

Trading Idea.
Sell 19,840 for 18,850 with a stop above 20,000. Entry was filled on 22 May. Shift stop lower to 19,500. Profit order was filled on 25 May.


Nasdaq 100 Index
(CFD Symbol: USTec)

Trend:

Recommendation:

Last: 13,902

Target price:

Protective stop:

Outlook
Price is currently ranging between its recent price top and the 20EMA support. If price could not penetrate above this price high resistance zone, we are likely to see a correction to 13,200. Stochastic is at the overbought zone. MACD could be forming a potential divergence warning.

Trading Idea
Sell 13,960 for 13,250 with a stop above 14,000.



FTSE 100 Index
(CFD Symbol: UK100)

Trend:

Recommendation: Short @ 7772

Last: 7567

Target price: 7670 Filled

Protective stop: 7820

Outlook
Price was resisted by its overhead 20MA resistance point. It further broke down a triangle consolidation pattern and is currently sitting at the Fibonacci 50% correction point. Stochastic is falling and MACD remains bullish

Trading Idea
Sell 7772 for 7670 with a stop above 7820. Entry order was filled on 18 May. Profit order was filled on 25 May.