Chart of the day - CHN.cash (29.08.2023)

The rally in Chinese indices has been one of the leading themes in the markets in recent days. Although it is largely based on expectations and hope (actual macro improvement has not occurred). But investors are gradually becoming convinced that Beijing will be determined enough to stimulate the market. A 50% reduction in the stock trading tax, new retail funds, loosening of rules on required security deposits and declared support for the real estate market have somewhat eased market fears although bonds are still losing and yields are rising placing the macro situation as still highly uncertain.

Although according to Bank of America the Chinese momentum may not last long in the face of deflationary risks and lack of improvement on the macro side, foreign capital made sizable purchases in the Middle Kingdom today, investing some $500 million in Chinese companies. Hoping for further relief and positive effects of the moves so far. The leaders of today's session's gains in China were the shares of electric car maker BYD and struggling insolvency risk developer Country Garden, which illustrates well the increase in risk appetite.

Looking at the CNH.cash index in a broader interval D1, we see that the declines in 2023 have been stopped twice at key support levels at the 61.8 Fibonacci retracement of the upward wave from the fall of 2022. The main resistance is now set by the SMA50 average (orange line), the breakout of which could herald a test of momentum at the SMA200 near 6650 points. We also see that the index has dynamically bounced off the lower line of the channel, which may indicate an attractive risk premium. On the MACD side, we also see a positive momentum of the so-called 'golden cross' and the RSI, despite the sizable increases, is still neutral, around 50 points.

Source: xStation5