US Federal Reserve chair Janet Yellen’s dovish statement in the congressional testimony has fuelled a rally in global stocks over the past two days. Euphoric sentiment was in the air, with the Dow Jones and Asia's leading index the Hang Seng both breaking out their key resistance levels of 21,500 and 26,170 respectively. 

Equities rallied in response to the weaker dollar, as well as expectations of a neutrally-biased monetary policy outlook. The S&P 500 index climbed to 2,447.8, moving closer to a key resistance level of 2,450.

Hong Kong’s stock market rode the rally as mainland investors continued to pour liquidity into it via the stock connections. Blue chips names in particular the banking and insurance, technology and consumer discretionary sectors were among the top of their shopping list.

The Hang Seng China Enterprise Index (HSCEI), which represents the H-share performances, surged 4.4% in the last three trading sessions. China A50 index, which measures the performances of the largest 50 listed companies in mainland, has also advanced to its highest level in over 20 months. Sector rotation continued to favour blue chips especially financial stocks, and this rally showed no sign to stop any time soon.

Looking forward, market participants are waiting for earnings season to paint a clearer picture of market direction over the next few weeks, as market focus now shifted to company’s mid-year reports. Big banks including JP Morgan, Citigroup and Wells Fargo are among the first batch to announce earnings tonight. In Singapore, SPH and Keppel Corp will kick off the start of earning season today, followed by CapitaLand Commercial Trust, Hutchinson Port, CapitaLand Mall Trust and SATS next week.

Technical analysis:

Hong Kong 50- Cash:

  • Breakout above key resistance level 26,170 area (100% Fibonacci level)
  • SuperTrend (10, 3) has flipped upwards, indicating that the long side is taking control again.
  • 10-Day Simple Moving Average is sloped upwards
  • Momentum indicator MACD has formed a bullish crossovers

CSOP FTSE China A50 ETF

  • Testing key resistance level of 13.42 (61.8% Fibonacci level)
  • 10-Day simple moving average and SuperTrend (10,2) both sloped upwards, indicating strong upward trend
  • Breaking out above 13.42 will open the room for more upside towards the next major resistance at 14.03 area (100% Fibonacci level)

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