Stocks Declined Sharply as "Short Squeezes" Drive Unsual Price Action

Summary of content for the week of  Jan 29:

1. Week 4 major indexes performance;

2. Week 4 US sector indexes performance;

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

U.S

Major Indexes SPX, DJI and COMP(Nasdaq) recorded their largest weekly loss in three months. SPX ended in a five-week low. Technically SPX closed at 3714.24, just beneath its 50dma at 3715.95 level, immediate technical support at 3630-3645 level if it continues downside move. All three indexes' major weekly uptrend still well intact. 

Major indexes performance for the month of Jan. SPX and DJI have given back all their gains and ended in red YTD. HSI index is the best index with 3.9% YTD return. 

Market Hotspot- GameStop and Short Squeeze

GameStop(#GME) was targeted by online forum Reddit the "WallStreetBet" (or is commonly referred as "WSB") to aginst the establishment "big-boys" short-sellers, due to its more than 100% short-selling interest by those institutional short-sellers and hedged funds. In a short trade, which is a bearish position, an investor borrows shares and sells them, hoping to buy them back at a lower price in the future.

What is "Short Squeeze"? In a "short squeeze", a rising stock price can force short investors to buy back the shares at a higher price, incurring losses on their bearish positions as they "cover" their shorts. If enough bearish investors cover their short positions, they can drive the stock price even higher.GameStop(#GME) and AMC Entertainment(#AMC) were two of the heavily shorted stocks that experience short squeezes, causing huge price gains and major losses on short positions. 

Is this market top from here? 

In short, we think this is not this bull market's end given that the fundamental outlook hasn't changed on below three aspects:

1) Outlook of the economy still on the recovery and expected to gain momentum after vaccine getting smoother. The government's massive fiscal stimulus will support the recovery.  

2) Corporate earnings are rising, offering sufficient support for current elevated valuations.

3) Monetary policy, the Fed interest rate kept at low and monetary stimulus in place for at least next two years.

SPX Sector Indexes Weekly Performance All 11 sectors ended in the red, Energy(XLE) lost the most with 6.5% down. 

China/HK

China SSE index recorded a weekly drop amid fears its central bank PBOC was turning hawkish after it drained over RMB 300 billion from the banking system in the week. SSE index ended in a four-week low, pull back to test 3450 level where it had bullish breakout 4-week ago. Technically, 3450 level is major support.

HSI index ended the first week down after a four-week rally in a row, it has formed a pretty bearish engulfing candlestick pattern on its weekly chart, which indicates potential further downside but it appears the bullish outlook has not changed, expected uptrend will resume after short-term profit-taking. 

Singapore

STI had its largest decline in three months for the week, pull back after the previous two-week sideway. Immediate technical support at its 50dma 2886 level. This year's target unchanged at 3100.

Stocks Continue to New Highs on Stimulus Hopes

 Summary of content for the week of  Jan 22:

1. Week 3 major indexes performance;

2. Week 3 US sector indexes performance;

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

U.S

Major three U.S indexes closed new high for the week, despite retreat on Friday. In focus is the $1.9 trillion stimulus plan and worsening coronavirus news, coupled with the vaccine rollout. 

It's expected the bull market has further room to run, though a period of consolidation and short term pullback is highly possible as markets have already priced in improvement in fundamentals. Rising corporate earnings and easy Fed policy are a powerful combination for rising stock markets. 

Among 11 major SPX sectors, five sectors closed positive and six sectors closed in the red. Communication services(XLC) outperformed for the week, boosted by sharp gain in Netflix. Technology(XLK) also very strong. Financials(XLF) and Energy(XLE) lagged. Refer to below sector weekly performance table for details.

This week will see more corporate earning results out. On Wednesday Jan 27, the three heavyweights Apple(AAPL), Tesla(TSLA), and Facebook(FB) will report their earnings. 

China/HK

China's SSE index rallied amid strong economic data and on hopes of warmer U.S-China relations under Biden's administration. China's 4Q GDP growth accelerated to 6.5% yoy, making it the only major economy to regain its pre-virus trend. Both SSE and .HSI weekly charts have had a four-week rally in a row, seen strong buying interests in Chinese stocks, especially Chiese technology stocks, such as Tencent(700hk), Alibaba(9988hk),Meituan(3690hk) etc. Technically both indexes appear to be overbought after a recent rally, expected short-term consolidation or pullback before a further upside move. 

Singapore

STI has a good start this year but it still has far more room for upside to catch up. Immediate technical resistance at 3100, expected the banks and Semicon names will perform better. Semicon globally under huge demand this year, Singapore-related companies such as AEM, UMS, Micro-mechanics etc expected to perform better. 

Biden's $1.9 Trillion Recovery Plan Failed to Lift Stocks

 Summary of content for the week of  Jan 15:

1. Week 2 major indexes performance;

2. Week 2 US sector indexes performance;

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

U.S

U.S stocks fell slightly this week ahead of a three-day holiday weekend, as disappointing data and mixed earnings, appeared to shrug off Biden's $1.9 trillion recovery plan. U.S equity markets will be closed for a public holiday on coming Monday. Below are major events highlights and their implications for the week:

1. Joe Biden announced a $1.9 trillion stimulus plan to counter the effects of COVID-19, which is about 9% of GDP. The plan will accelerate the recovery in the economy and add to the already excessive supply of bonds, benchmark 10-year Treasury yields have risen steadily to 1.087% from below 1% started the year. 

2. Stock Selection: Steep yield curve is good for financial-sector stocks such as banks, also economically sensitive sectors such as industrials, energy and materials. While defensive sectors such as utilities, real estate and consumer staples lagged historically. The Technology sector has performed well historically during rising and falling rates due to its strong earnings delivery.

3. Q4 earnings season kicked off this week. JPMorgan(#JPM), Citi(#C), Wells Fargo(#WFC) reported mixed results. 

Technically, the SPX index closed the first week down after a three-week up streak, off the peak after hitting a new record high the previous week. Uptrend is well intact but facing short-term downside risk. 

China/HK

Two weeks into the new year 2021, the three major Asia indexes in my table below i.e .HSI, SSE and STI have seen obviously better performance than the U.S three, with at least 2% YTD return each while the U.S three recorded less than 1% return separately. We expect this trend to be continued this year as the underperformed Asia stocks appear more attractive as compared to the already rocket-high U.S stocks. 

China's SSE index fell after four-week up in a row. U.S added another nine Chinese companies to its investment blacklist, total to 44 names. Alibaba(BABA, 9988.HK) and Tencent(700.HK) were volatile on report they too would be added to the list. Xiaomi(1810.HK) fell sharply on Friday on its unexpected addition to the list. 

HSI index has been rallied three-week in a row, very bullish, the index expected to play catch-up this year after the under-performed previous year. 

Singapore

STI had a very strong start in the year 2021, has been the best performer in the first two weeks with 5.66% YTD return. Technically it appears more room to upside move. Immediate target level 3100 in the coming weeks. Refer to below major indexes weekly performance table and weekly charts. 

Stocks Hit New Highs on Stimulus Hopes, Electric Cars and Bitcoin Under Spotlight

 Summary of content for the week of  Jan 8:

1. Week 1 major indexes performance;

2. Week 1 US sector indexes performance;

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

4. Sector/Stocks In Focus

U.S

U.S major indexes continued to march higher to record highs despite the violence in the U.S Capitol Hill on Wednesday, as markets are on high hopes of more massive stimulus packages after the Democrats secured the Senate majority following its victories in Georgia runoff. Major events and economic data for the week:

1. Energy sector was the top-performing SPX sector as Saudi Arabia made a surprise announcement to cut oil production by 1 million barrels per day.

2. Democrats control across the White House and Congress will pave the way for stimulus packages and also raise corporate tax and increase taxes on high earners.

3. ISM manufacturing data in Dec rose to 60.7, its highest level since Aug 2018. ISM service sector also surprised on the upside, hitting 57.2, its highest in three months. But labor market showed a sharp slowdown as nonfarm payrolls fell in December., its first decline since Apr. 

Electric Cars and Bitcoin Surging Higher. Tesla(TSLA) hit 880.02 added 25% this week. Chinese top electric car makers such as NIO Inc(NIO) also added 21% for the week, as Tesla launched its new Model Y on the first day of the new year 2021 with cutting down on its price, attracted massive orders in China. Elon Musk, the CEO of TSLA now world the richest person, overtaking Jeff Bezos from Amazon(AMZN). 

Bitcoin hit a new high, closed at 40535 this week, added nearly 40% from the previous week. Bitcoin-related stock and ETF such as Marathon Patent(MARA) +153% this week to 26.39, RIOT Blockchain(RIOT)+57% to close at 26.59 this week. 

China/HK

China's SSE index began the year on a very strong note, SSE index closed a multi-year new high since Jan 2018. Technically, SSE index finally had a bullish breakout from its five-month sideway consolidation range, further upside expected. Foreign funds continue to flow into China's bond and stock markets given the strong yuan and high yield as compare to the rest of the world. 

HSI index rallied 2nd week to new high since Feb 2020, very bullish. The HSI index expected to play catch-up in 2021 after a poor performance in 2020. 

The New York Stock Exchange(NYSE) reversing itself for 2nd time in one week, have decided to go ahead with delisting three Chinese telcos. The U.S government is also considering adding Alibaba(BABA, 9988.HK) and Tencent(700.HK) to its blacklist. But bargain hunters rushed in to buy up SMIC(981.HK) which blacklisted by U.S this week, pushing it to close at 25.0 hkd, a new high since Nov 2020. 

Singapore

STI recorded its best weekly gain never seen for a long time. Added 5.25% this week and was the best performing index(refer to below major indexes weekly performance table). Singapore three bank led the rebound, it's expected STI will catch-up in the new year 2021 after being the worst performing index last year. The immediate target is 3100 level which is its major downtrend line resistance.(refer to below major indexes weekly charts)

Outlook 2021 and Top Buy Stocks(Lists)

 Two important lessons to learn from 2020 stock markets are to keep a long-term perspective and the belief that markets are forward-looking. Heading into 2021 we look forward to hopefully a year when the pandemic subsides, lives return closer to normal, and economic recovery picks up. Below are the highlights of the sectors with stock in focus for the year 2021.

1. Semiconductor/Chips: The global Semicon industry suffered its worst year in almost two decades and picking up to return to growth in 2020, according to World Semiconductor Trade Statistics. The group sees Semicon sales accelerating further in 2021. The fastest-growing category of semiconductors in 2021 is memory chips, with forecast growth at 13.3%. As electric vehicles, smartphones, 5G equipments etc all need chips, chips are in great demand. The largest chipmaker in the world is Taiwan Semiconductor Manufacturing(TSM), and other top players including Advanced Micro Devices(AMD), Nvidia(NVDA), Qualcomm(QCOM), Apple(AAPL), and ASML(AMSL). Or Semicon Sector ETF SOXX.

In Hong Kong, related top players including SMIC(981) Sunny Optical(2382), AAC Tech(2018) or Hang Seng TECH Index ETF(3033) 

In Singapore, related tech players including AEM, Frencken, UMS

2. Food Delivery: Virus won't go away at least for quite some time, and home office will be the new norm. It's expected food delivery companies will do well. Companies in focus including Uber Tech(UBER), DoorDash(DASH).

3. Online Shopping and Logistics: Amazon(AMZN), Alibaba(BABA, or 9988.HK), Pinduoduo(PDD), ContextLogic(WISH), WISH is called the U.S version of China's Pinduoduo, just launched its IPO on Dec 16, it traded underwater to its IPO price US$24. and also FedEx(FDX) and United Parcel Service(UPS)

4. Remote Working: Zoom Video Communications( ZM), Cisco System(CSCO), Slack Tech(WORK), Alphabet(GOOGL), Facebook(FB), Microsoft(MSFT)

5. Online Education: TWOU(2U), Stride(LRN), 17 Education(YQ), GSX Techedu(GSX), TAL Edu(TAL) New Oriental Edu(EDU)

Hong Kong related stocks: New Oriental Edu(9901), Koolearn(1797)

6. Remote Healthcare: Teladoc Health(TDOC), American Well(AMWL), Veeva System(VEEV)

7. Online Entertainment: Netflix(NFLX)

8. Consumer Staples: Wal-Mart Stores(WMT), Costco Wholesale(COST), Procter & Gamble(PG), or SPDR Consumer Discret Sector ETF(XLY)

In Singapore, related stocks Wilmar.

9. Insurance and Wealth Management technology companies: Lemonade(LMND) Lufax(LU)

10. New Energy Vehicle companies: Tesla(TSLA), NIO, XPeng(XPEV), Li Auto(LI)

In Hong Kong, related stocks Ganfeng Lithium(1772) which is the top battery supplier to TSLA and other electric car companies. 

In Singapore, there are two companies with very unique business thus give them unbalanced advantages: Nanofilm and Credit Bureau Asia.

A Look Back At An Unprecedented Year 2020

 Summary of content for the week of  Dec 31:

1. Week 53 major indexes performance;

2. Week 53 US sector indexes performance;

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

4. Major Indexes monthly performance for December

5. Wrapping up the year 2020

U.S

U.S major indexes hit all-time highs in the holiday-shortened last week of the year. Stocks closed out a year of solid gains led by the technology-heavy Nasdaq Composite Index(COMP), which recorded its best annual performance since 2009, with a total 43.64% return. 

To highlight, Consumer Discretionary(XLY) shares were very strong, as electric vehicle maker Tesla(TSLA) just joined the index. Energy(XLE) stocks lagged in the week. 

A look back at an unprecedented year. The year 2020 will go down in history as one of the most memorable and unpredictable years of our lives. Below are some of the highlights(good and bad):

1. The fastest bear market and the fastest recovery from a bear market on record. SPX entered into the bear market from all-time highs in just 23 days, with 34% decline. On the flipside, SPX rebounded to new highs in Aug recorded the fastest recovery from a bear market on record in just four months. By year-end, SPX rallied 71% from March 23 bottom and closed 16% up for the year. 

2. Record GDP swings. The U.S 2Q GDP contracted -31% annualised and rose 33% in 3Q after reopening of the economy. 

3. Unemployment spikes. Apr 2020 saw the unemployment rate spiked to 14.7%-the highest level since the Great Depression from a 50-year low of 3.5% in Feb. 

4. Fed's enormous asset buying. Fed injected over US$ 3 trillion over the course of four months, a similar amount it had done in four years in the 2008 financial crisis. 

5. Negative oil rates. In Apr, oil prices fell into negative territory for -US$37 per barrel first time in history. 

China/HK

China Shanghai SSE index finished at a new high since Feb 2018 as investors anticipated stronger growth in 2021. The great news before the year ended was EU and China agreed on an investment treaty after seven years of talks. The HSI index also closed at its highest since Feb 24 2020, further upside is expected. One company to highlight is Alibaba(BABA, 9988.HK) which saw its price rebounded in the last week of the year, after dropping as much as 33% from its all-time high on Oct 26. 

Singapore

STI was the worst-performing index with an 11.76% loss( refer to my weekly index performance table below). It's hoped the Singapore stocks will do a catch up in the new year 2021 after the vaccine was carried out first in Asia. Technically, STI next major target is at the 3100 level.