[Weekly Market Outlook] KOSPI Nears Technical Resistance Zone, Recovers to 2500 Level

The stock market this week (November 27 to December 1) is expected to see a slowdown in upward momentum as it approaches a technical resistance zone.

Last week, the KOSPI rose by 1.08% and the KOSDAQ by 1.99%, continuing a four-week consecutive upward trend. However, the KOSPI, which had recovered above the 2500 level, fell on the 24th and dropped back below 2500.

[Image source=Yonhap News]

Choi Yoo-jun, a researcher at Shinhan Investment Corp., analyzed, "The market rose for four consecutive weeks in sync with the U.S. stock market due to interest rate stabilization. Although the earnings season ended and there was no special momentum, foreign investors steadily bought both spot and futures."

Kim Young-hwan, a researcher at NH Investment & Securities, explained, "After the short-selling ban helped the KOSPI recover the 2500 level, it fell due to profit-taking but reclaimed 2500 again after 11 trading days. The first reason for the rise was the decline in the dollar index and U.S. Treasury yields, which expanded expectations for a Fed easing policy due to the slowdown in U.S. inflation and economic indicators in October. The second reason was the improvement in Korean exports; exports from November 1 to 20 increased year-on-year following October, with semiconductor exports rising 2.4% year-on-year, which was positive."

As the KOSPI enters a technical resistance zone after sustained gains, a pace adjustment is expected. Researcher Choi said, "The KOSPI is approaching a technical resistance zone, and the price momentum of leading semiconductor stocks has slowed around the time of Nvidia's earnings announcement."

Lee Kyung-min, a researcher at Daishin Securities, said, "Ultimately, the trend is expected to head toward 2600, but in the short term, it is a time to ease overheating concerns and digest volume. Since surpassing 2500, the KOSPI's rebound momentum has been limited; the 2500 level coincides with the 200-day moving average, a trend line, and the 2520 level aligns with the 120-day moving average, a business cycle line."

It is explained that fundamental improvements are necessary to break through the technical resistance zone. Researcher Choi Yoo-jun said, "During the November moving average breakthrough, the 20-day moving average (psychological line) reflected factors such as easing interest rate burdens and the short-selling ban, and the 60-day moving average (supply-demand line) reflected strengthened foreign net buying after confirming the U.S. October Consumer Price Index (CPI). These factors mainly influenced investor sentiment rather than fundamental improvements. The 120-day moving average is a business cycle line acting as technical resistance, and expectations for fundamental improvement need to be reflected to break through it."

Fundamental improvement trends are expected to be confirmed through indicators released this week. Researcher Kim Young-hwan said, "Next week, U.S. Black Friday sales and Korea's November export data are scheduled to be announced, which are seen as events to reconfirm fundamental improvement from the domestic stock market's perspective. However, it is necessary to be mindful that additional upside potential may shrink in December." NH Investment & Securities has set the expected KOSPI band for this week at 2450 to 2570.

Since short-term volatility may increase, it is advisable to refrain from chasing purchases. Researcher Lee Kyung-min said, "Despite attempts at further rebounds, the market's upward energy is weakening, and the possibility of short-term volatility expansion is increasing soon, so caution is needed. It is necessary to refrain from chasing purchases and switch to a buying strategy during corrections."

Key events to watch this week include the U.S. November Conference Board Consumer Confidence Index and U.S. Q3 Gross Domestic Product (GDP) announced on the 29th; the U.S. Fed Beige Book, Korea's October Industrial Activity Trend, China's November National Bureau of Statistics Purchasing Managers' Index (PMI), and U.S. October Personal Consumption Expenditures (PCE) Price Index on the 30th; and Korea's November export-import trends on the 1st. Researcher Choi Yoo-jun said, "At the end and beginning of the month, PMI releases from the U.S. and China are scheduled. The October manufacturing PMI declined, indicating a slowdown in the manufacturing recovery pace. The manufacturing sector is linked to the domestic stock market's fundamentals and will determine whether the KOSPI can break through the technical resistance around the mid-2500 level." Researcher Lee Kyung-min added, "October PCE inflation is expected to rise 3.1% year-on-year, and core PCE by 3.5%, slowing compared to September. Amid ongoing price stability and economic slowdown, the results of economic indicators will inevitably lead to a seesaw game between economic anxiety and expectations for interest rate cuts."