Something Bullish Could Be Happening in China
U.S. stocks fell into a “bear market” this week. Meanwhile, a new bull market could be starting across the Pacific.
This chart shows the iShares China Large Cap ETF with relative strength compared to the S&P 500. FXI lagged the U.S. benchmark consistently between February 2021 and May 2022. But it’s outperformed in the last month as officials in Beijing lend support to the business community.
As many traders know, a bear market starts when an index drops 20 percent from its high. A lesser-known definition from S&P states that a bull market begins with a rebound of 20 percent from the low. By this definition, China exited its bear market earlier in June.
Perhaps even more interesting is the strength of China’s burgeoning technology sector – especially with the Nasdaq-100 reeling lower. This second weekly chart features the Nasdaq Golden Dragon China Index, which holds major companies like Alibaba and JD.com. Notice how it appears to have broken a falling trendline.
Second, HXC’s relative strength histogram is pegged to the Nasdaq-100, home to major names like Apple and Microsoft. Its recent outperformance was the highest in 17 years of history. The divergence is noteworthy because Chinese tech stocks have typically behaved like high-beta versions of their U.S. peers. This time they’re trying to break out at the same time a hawkish Fed hammers Silicon Valley valuations.
Traders may want to consider whether a bigger rotation is underway.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
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TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. You Can Trade, Inc. is also a wholly owned subsidiary of TradeStation Group, Inc., operating under its own brand and trademarks. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
This chart shows the iShares China Large Cap ETF with relative strength compared to the S&P 500. FXI lagged the U.S. benchmark consistently between February 2021 and May 2022. But it’s outperformed in the last month as officials in Beijing lend support to the business community.
As many traders know, a bear market starts when an index drops 20 percent from its high. A lesser-known definition from S&P states that a bull market begins with a rebound of 20 percent from the low. By this definition, China exited its bear market earlier in June.
Perhaps even more interesting is the strength of China’s burgeoning technology sector – especially with the Nasdaq-100 reeling lower. This second weekly chart features the Nasdaq Golden Dragon China Index, which holds major companies like Alibaba and JD.com. Notice how it appears to have broken a falling trendline.
Second, HXC’s relative strength histogram is pegged to the Nasdaq-100, home to major names like Apple and Microsoft. Its recent outperformance was the highest in 17 years of history. The divergence is noteworthy because Chinese tech stocks have typically behaved like high-beta versions of their U.S. peers. This time they’re trying to break out at the same time a hawkish Fed hammers Silicon Valley valuations.
Traders may want to consider whether a bigger rotation is underway.
TradeStation has, for decades, advanced the trading industry, providing access to stocks, options, futures and cryptocurrencies. See our Overview for more.
Important Information
TradeStation Securities, Inc., TradeStation Crypto, Inc., and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., all operating, and providing products and services, under the TradeStation brand and trademark. You Can Trade, Inc. is also a wholly owned subsidiary of TradeStation Group, Inc., operating under its own brand and trademarks. TradeStation Crypto, Inc. offers to self-directed investors and traders cryptocurrency brokerage services. It is neither licensed with the SEC or the CFTC nor is it a Member of NFA. When applying for, or purchasing, accounts, subscriptions, products, and services, it is important that you know which company you will be dealing with. Please click here for further important information explaining what this means.
This content is for informational and educational purposes only. This is not a recommendation regarding any investment or investment strategy. Any opinions expressed herein are those of the author and do not represent the views or opinions of TradeStation or any of its affiliates.
Investing involves risks. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options, futures, or digital assets); therefore, you should not invest or risk money that you cannot afford to lose. Before trading any asset class, first read the relevant risk disclosure statements on the Important Documents page, found here: https://www.tradestation.com/important-information.
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