The US employment data and housing price trends are very indicative. QE2 did not help the US economy out of its predicament, while the tightening in emerging economies is also suppressing demand, and the brewing Euro crisis seems to point to a possible double-dip for the global economy, or in other words, after the counter-cyclical impulse of global stimulus, the economy needs to find its natural bottom. Structural market conditions may still exist; we recently emphasized high-end baijiu, rare earths, and coal, which might all have short-term opportunities, but we do not recommend chasing highs and suggest realizing profits at appropriate times. Anyway, the downward break of commodities, especially European and American stock markets operating below the 60-day line, indicates a deteriorating long-term trend, at least a worsening mid-term trend. Once the 60-day line also declines, they will repeat the story of the A-share market, and such possibilities are increasing. Technically speaking, before the festival, the market returned to the 2700-2750 box, but was pressured by the 10-day line. We cannot rule out the possibility of breaking above the 10-day line intraday today, but due to approaching 2750, the upward momentum of the market will be restrained, so there might be a pullback after a rise. Note that since April 18, every rebound of the market has failed above the 10-day line.
Perhaps, we can only find reasons from commodities reflecting demand: including agricultural products like beans, which have maintained a sideways and downward trend since February 2011; base metals have also maintained the same trend; more importantly, the sharp drop in crude oil in early May and the technical indications of an impending sharp drop suggest that the direction of demand is changing, and a weak dollar cannot support crude oil anymore. Meanwhile, the strength of gold indicates the choice of risk aversion, and possibly reflects concerns about economic prospects.
Therefore, regarding the overall market, we still suggest paying attention to waiting for the emergence of mid-term signals, as right-side trading is always safer. Some recent market phenomena should be noted: 1) QE2 faces exit, but the dollar continues to weaken, does this mean the US might introduce QE3? 2) If QE3 is expected, it could support the stock market, yet the market's reaction is showing bearish signs with a break below the 60-day line.
Using the "Prophet Risk Control and Intelligent Stock Selection System" for free individual stock diagnosis, please consult the link to understand more details. The article above represents the author's morning views and does not constitute investment advice, for reference only. The flight returns to Beijing at noon.
Despite the approval of another Greek bailout plan, European stocks continue to decline, and the euro unexpectedly ended its sustained upward trend, but we still cannot attribute the rebound of the dollar to the external market's decline, because in the past week, the external market's decline was synchronized with the dollar.
Has the above evidence appeared? There were no tightening measures during the Dragon Boat Festival, instead, the market was suppressed. The market will wait for economic data through volatility, at least no one would say that the May CPI will decline. In terms of monetary policy, market expectations have always been disappointed, and the shadow of tightening still looms over the market. The decline in GDP will lower the growth expectations of listed companies, and the valuation level cannot go against the trend. The international board cannot be underestimated, once the market rises, concerns about it begin to strengthen.
We hope that the A-share market can independently enter a bull market, but to achieve such a market situation, it must possess: 1) GDP growth; 2) The peak and subsequent decline of CPI; 3) Gradual easing of monetary policy; 4) The turning points of the first three indicators; 5) Relatively clear statements on the big bomb of the international board.
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