Technical Analysis | Buying Opportunities in US Stocks Approaching! Uncertainty in Hong Kong Stocks for Rebound Space Determination

Source: Analysts Wang Xueheng and Zhang Xi from Guosen Securities

Hawkish Signals Strike

After the FOMC meeting, the market was once hit by a rapid and strong impact. Among them, the implied probability of rate hikes in the derivatives market still maintained the judgment that the Fed will not continue to raise interest rates in 2023, but at the same time, the judgment of the number of rate cuts by the Fed in 2024 was lowered from 3 to 2. The 10-year Treasury yield quickly broke through, reaching over 4.5%. The US dollar index also showed an upward trend.

However, on the last trading day of last week, the tension in the market eased somewhat: the implied federal funds rate expectations in the derivatives market returned to 3 rate cuts in 2024; the 10-year Treasury yield fell to 4.4%.

Guosen Securities believes that if there is no further catalyst, the position of the 10-year Treasury yield at 4.5% will be the top for the next 2-3 weeks, and the probability of interest rates rising and surpassing the previous high within this period is not high.

However, if we extend the observation period to more than 1 month, we still believe that the Fed will announce a rate hike at the FOMC meeting in November. Considering that the market has not fully priced in this possibility, it is believed that there is still a possibility of a rebound in the 10-year Treasury yield.

US Stocks: Buying Opportunities Approaching

Under the influence of monetary policy, US stocks experienced a significant decline last week. Currently, the S&P 500 and the Nasdaq Composite Index have fallen to the MA120 (120-day moving average), which is the target of Guosen Securities for this round of US stock retracement. The Nasdaq 100 is also approaching this level.

Admittedly, this is a technical judgment based on empirical experience. Therefore, it is recommended that investors closely monitor this week and wait for further confirmation signals of the temporary bottoming of US stocks and the peaking of the 10-year Treasury yield, and then choose to enter the market on the right side when the signals are clear.

If buying, the stop-loss level should be set at the position of MA120, corresponding to 4340 points for the S&P 500 and 14600 points for the Nasdaq 100.

Hong Kong Stocks: Clear Bottom Position

The Hong Kong stock market experienced a rapid retreat in the first four trading days of last week, and rebounded slightly on Friday influenced by market optimism. The fundamental situation of the Hong Kong stock market has not yet undergone a decisive change, so it is currently difficult to determine the upside potential if the market starts to rebound. However, the bottom of the Hang Seng Index at 16,200 points seems relatively clear at present. This price includes three significant factors:

1. Hang Seng Index's price-to-book ratio at 1x;
2. The lower boundary of the technical chart's oscillation range;
3. The strong buying signal position with a 95% bullish probability according to the risk premium model.