Chart Advisor: China Bulls Take Charge – Chinese equities take on a leadership role as participation broadens from global equities.

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Friday, 2nd December, 2022

1/ China Bulls Take Charge

2/ FTSE Closes in on Highs

3/ European Banks Diverge

4/ USD/JPY Fails to Hold

Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.

1/ China Bulls Take Charge

Chinese equities have stood out as leaders among global markets in recent weeks.

The chart below illustrates this theme by displaying one-month performance across various industry groups.

All Star Charts, with data provided by Koyfin

As shown in the chart above, the China Internet (KWEB) and China Technology (CQQQ) ETFs have surged 47% and 28%, respectively, while their peers have barely risen.

Based on the evidence, Chinese stocks are assuming a leadership role, at least for the short and intermediate term.

2/ FTSE Closes in on Highs

Among European equity benchmarks, the FTSE 100 catches our attention as the index pushes against the upper bounds of a multi-year base.

This index has only a minor exposure to the technology sector, and a heavy weighting toward cyclical value sectors. Considering how poorly technology has performed over the past year, it makes sense to see this index show leadership.

Source: All Star Charts, with data provided by Optuma

While markets are still in the base-building process over the short and intermediate term, we could see the FTSE 100 eventually resolve higher. If and when it does, it could be a major development in favor of stock market bulls.

3/ European Banks Diverge

Deutsche Bank (DB) is no longer the most distressed major European bank. Credit Suisse (CS) has taken over that role, as the stock has been collapsing lower all year. 

DB has rallied roughly 45% off its early autumn lows. Meanwhile, CS has fallen further as clients have pulled a record amount of funds from the bank.

Source: All Star Charts, with data provided by Optuma

This bearish price action has been unique to Credit Suisse. Since early October, other European banks have posted impressive rallies.

When a stock is diverging this much from its peer group, it’s prudent to pay close attention. The market is telling us there could be major underlying issues with CS at the moment.

4/ USD/JPY Fails to Hold

Reviewing monthly candlesticks at the end of each month provides valuable insights into underlying trends. It reminds us of the big picture after weeks of examining shorter timeframes.

This month, the USD/JPY currency cross has become one of our favorite charts. It highlights the U.S. dollar’s failed breakout above the 1998 highs and reveals the intensity of recent selling pressure.

Source: All Star Charts, with data provided by Optuma

The bears are in full control of USD/JPY, and risks could remain to the downside as long as this forex (FX) pair holds below $145. This is bearish for the U.S. Dollar Index (DXY), as the Japanese yen comprises 13.6% of the index weighting.

This development bodes poorly for the dollar, and could benefit risk assets worldwide as global equities receive a much-needed lift.

Originally posted 2nd December 2022

Disclosure: Investopedia The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy.  While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Investopedia and is being posted with its permission. The views expressed in this material are solely those of the author and/or Investopedia and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: ETFs

Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Forex

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.