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

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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.

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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.

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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.

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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.

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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

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