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Is “sell in May” over?

By Margaret Yang, CMC Markets

Equities – Asian equities rebounded strongly on Wednesday, led by Hong Kong and Japan. The Hang Seng Index soared 537 points or 2.71%, driven by the energy and consumer sectors. Tencent Holdings (700 HK) and HSBC Holdings (5 HK) jumped 2.5% and 3.81% respectively. The Singapore market closed 0.8% higher, with 1Q GDP data in line with market expectation.

Market sentiment has been improved recently on strong US economic data, and that brings us the question again: is the worst part of May finished already?

The MACD for both the Hang Seng Index and SiMSCI futures have finally formed positive crossovers (a bullish signal), following a month of consolidation since the end of April. The Hang Seng index has found strong support near the 19,700 level and it decided to head north. The immediate resistance level is 20,700. For the SiMSCI, immediate support and resistance are at 303.0 and 316.0 respectively.

FX – The Dollar Index retraced from its recent high of 95.60 to 95.20. USD/JPY has slid to the 109.50 area this morning. The immediate support and resistance levels for USD/JPY are 111.00 and 108.30 respectively. EUR/USD has also rebounded to the 1.1170 area. AUD/USD, however, is still sliding down to the 0.7180 area, near to a 3-month low.

Commodities – Crude oil prices surged last night, as the weekly US DoE crude inventory dropped more than the market expected. Crude stocks fell by 4.22 million barrels as compared to a week ago, signalling a reduction of supply in the market. WTI crude oil futures opened at $49.70 today and climbed to the $49.80 area this morning. Gold and Silver prices have rebounded from their recent low, as the US dollar retraced from recent highs.

Hong Kong 50 - Cash

hongkong cash

Key Technical levels to watch:

  • Key support level: 19,700
  • Immediate resistance level: 20,700
  • MACD formed positive crossover

Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore.