CHINA DEFLATIONARY CYCLE LEADING US This is something when it is going up we are all cheering the GDP . we are running at 125/128 debt to G D P.
FXI
FXI: China Large Cap ETF Critical JunctureEven in retirement I scour hundreds of weekly and monthly charts. When I come across promising setups, I drill down to see if there are chart elements, price volume relationships, or other factors that might either preclude a trade or tip the odds heavily in favor of a particular outcome. Most of that process is covered in the "Potential TLT inflection and Notes on Process" post linked below.
FXI, is the China Large Cap ETF that holds the top 50 large cap stocks trading on the Hong Kong exchange. It is currently testing long term support. The outcome of the test is likely to set the stage directionally for the remainder of the year. While I came away from my analysis with a bearish view, this is also precisely the kind of setup around which I build mostly agnostic trading plans.
Fundamentally, there isn't much currently going on in China that leads me to optimism. China is a command economy run by a communist regime that is in the process of retreating from capitalism. Importantly, they seem to be increasingly resistant to stimulus. In the near term, the Zero Covid policy is still in effect and the property and construction sectors are in crisis. To that list you can add a rapidly aging population, a world increasingly resistant to buying from their goods, a rethinking of global supply lines and significant raw material and climate challenges. Granted, there are positives. They are becoming a chip superpower, and over the last two years have made some very significant technological advances. But, my in my view, the negatives outweigh the positives by quite a lot.
In early March, as price was punching through the range support, Vice Premier Liu He promised to keep equity markets stable, and that the crackdown on the tech sector would end soon. The promise created one of the strongest two-day rallies in years. Clearly, if China chooses to massively stimulate and overtly support their equity market (perhaps through direct purchase of equity) it would be a game changer. But, despite Liu He, I think pessimism is warranted. That said, as students of the market, we understand that narratives drive markets, until they don't, and then new narratives, evolve to explain the new price action.
Those of you familiar with my work know that I maintain a macro view on most markets. That view, informs my aggressiveness and risk tolerance, but, if a techncial setup provides a clear risk reward advantage, it does not deter me from making trades that don’t conform to the view. FXI is setting up exactly that situation.
Either it survives the test of the range lows, and sets up for potentially a 20-25% move higher, or fails and sets up what could be an even larger move lower. Either way, I will have a trading and risk management plan in place, no matter the directional outcome.
FXI Weekly: Since the March climax and automatic rally (AR) the market has traded laterally for 24 weeks and defined a trading range. Whether the range is one of re-distribution or of accumulation is an important, but difficult, question.
In this perspective the selling climax structure holds up, with a clear/classic high volume reversal bar. But, the follow through (AR) over the next two weeks was meager and volume still quite high. The combination of high volume and narrow price spread suggest that the market was already running into significant supply.
The Wyckoff selling climax sequence includes what he called the "automatic rally" (AR). The AR occurs as immediate sellers are cleared out by the selling climax. Some strong handed, proactive traders take new longs creating some nascent demand. I prefer to see the AR cover a significant distance. In my estimation, a weak AR represents a sign of weakness.
To become constructive, the market must, at a minimum, break above the A-B downtrend. That downtrend represents the stride of supply. It must also move convincingly above the lateral resistance along the 34.83 zone.
It is notable that FXI, has yet to complete a solid test of the low. I prefer tests well separated in terms of time that come close to fully retracing the climax structure. Failing this, a sign of strength above the high of the automatic rally (34.83) would suffice to suggest that a good bottom was in. If that level is exceeded, entering bull flags and other corrective style drift patterns would become part of my approach.
I have included a long-term volume profile on the chart. If the market does begin to work its way above the lateral resistance, the huge volume bulge in the 42.00 zone should act as strong resistance. 42.00 is also in the vicinity of the .50 - .618 retracement zones.
FXI Daily: In this perspective the selling climax appears very different. After gapping through the support, volume increased significantly and price spread narrowed somewhat (suggesting at least some developing demand). The Liu He statements gapped the market 10% higher and left behind an island reversal gap.
In this perspective it becomes clear that the exhaustive volume wasn't generated in a typical selling climax fashion, but rather after the gap and near the highs. In my view much of the volume was generated by strong handed sellers selling into the strength AFTER the market gapped higher. This is clearly an atypical selling climax and tempers any enthusiasm generated by the violent rebound evident on the weekly and monthly chart.
It is also notable that the lateral trade since the March low have relieved the oversold conditions that had accrued at the March low.
Relative Strength Ratio Chart: This is a weekly relative strength chart, comparing FIX (the numerator) to world markets URTH, (the denominator). It is somewhat skewed because URTH is not ex-China. In other words, China is included in both numerator and denominator, skewing the ratio. However, over the last decade, China has consistently underperformed. To become optimistic for anything beyond a trading turn would require the Chinese market begin to markedly strengthen relative to the rest of the world.
I often take a quick look at the larger components of any ETF I am thinking about trading. As I look through the top eight large cap names in the ETF I see few signs of a solid bottom or charts that appear ready to rally.
One last thought, in the process piece linked below my final step is the sanity check. Am I falling prey to behavioral bias? Am I being dispassionate? Is my belief system compromising my impartiality? I have to conclude that in the case of China, that it may well be so. I don't like the Chinese government and am loath to invest there for anything other beyond a trading turn. Historically, command economies that are becoming less free tend to make for lousy investments. They are also subject to step function changes due to changes in policy, wrecking risk management overlays. Clearly my strongly held view may compromise my read of the FXI chart. Because of this I will need pay greater than normal attention to how I build my trading plan.
Conclusion: I believe that the weight of the evidence suggests the presence of superior supply and supports the likelyhood that, once the oversold is removed, FXI falls through the bottom of its longer-term range. Clearly if the Chinese add stimulus or perhaps buy equity directly, the game/narrative could quickly turn and I will need to adjust. But as I build my trading plan I will be more much aggressive on the short side of the market.
And finally, many of the topics and techniques discussed in this post are part of the CMT Associations Chartered Market Technician’s curriculum.
Good Trading:
Stewart Taylor, CMT
Chartered Market Technician
Taylor Financial Communications
Shared content and posted charts are intended to be used for informational and educational purposes only. The CMT Association does not offer, and this information shall not be understood or construed as, financial advice or investment recommendations. The information provided is not a substitute for advice from an investment professional. The CMT Association does not accept liability for any financial loss or damage our audience may incur.
China ETF GXC - Bounce off support?It has been a really long time since GXC was updated. Previously, an imminent breakout was expected, but it failed, in an epic fashion, to find itself the bottom support of the triangle.
Has it bottomed out and ready for a bounce?
Early game, but just want to put in the observation that it might bounce for the next attempt to breakout of the triangle. The weeks ahead will be clear that up...
Conversely, a break down of the triangle would be bearish!
Watch this space... IMHO, worth to watch China equities.
FXI China Large-Cap ETF I am bullish on iShares China Large-Cap ETF.
I would buy the following calls:
2022-8-19 expiration date
$32.11 entry price (approximatively)
$37 strike price
$0.20 premium/share
Looking forward to read your opinion about it.
Chine ETF GXC about to break out...For some time, GXC had been flagged as potential for upside... massive upside. Within a triangle, it had already gained over 10% since it was flagged.
This week, it appears to be breaking out... out of the triangle that it has been coiling in.
Obvious that the weekly and daily chart technical indicators are bullish, or crossing over bullishly. Candlesticks are pointing that too. All systems go here.
Target 20% upside... 112 in early to mid-August 2022.
China ETF GXC suprising outcomePreviously, GXC appeared to be coiling to launch a break out... it appears to have done so, but at a higher level .
Weekly technicals appear better suited for a impending breakout, Daily technicals are not yet ready and baking...
Still in the radar, but overall sense is that China (and Chinese equities) will take off. We are still in early days, but imminent. Only time will tell...
FXI / Nasdaq Relative Strength & Correlation China's Large Cap ETF (FXI) is showing notable bullish Relative Strength (RS) compared to the Nasdaq (0.26 on the Daily RS, using a 50 period timeframe). The typical RS between these two fluctuates between -0.15 - 0.10. FXI also tends to have quite a strong correlation coefficient vs. NDX, but we're finally seeing that break down (0.24 on the Daily w/ a 50 length and trending down). Conservative swing traders want to see a breakout above ~$34 for longs, which would clear the downward sloping trendline that FXI has been respecting since early 2021. While there's still geopolitical risks associated with trading Chinese equities (e.g. tensions with Taiwan), China's recent dovish tilt is encouraging for swing-trading speculators.
AMEX:FXI
NASDAQ:NDX
China ETF GXC pre-launch testPreviously been highlighting China, particularly as Chian equites have been misunderstood, maligned, and assumed to have downside due to their tough COVID-19 strategies.
As expected, GXC launched with a gap up. However, this gap up did not translate further into a gap and run, but instead stalled. In view of the overall technical picture, it appears may have formed the last triangle pivot point.
Hence, the triangle has been adjusted accordingly, from previous.
The weekly chart has nice technicals with RPM and MACD crossing over upside. Would have preferred a more bullish candlestick for the week, but that did not happen.
The daily chart has a gap and stall, and this is likely to pan out with a retracement close and reopen the previous gap. Possibly to reconnect with the MA band, and then the real launch with a triangle breakout at the end of June. Path sketched out there.
Bullish but need some more baking time...
China ETF GXC to launchAs previously described, yes, the GXC ETF appears to have found its footing to launch.
The weekly chart has clocked a higher low, and this week's candlestick is a nice bullish one with a long-ish trailing tail at the bottom, which is a bullish indication.
The daily chart shows the week closing at a gap resistance, and above the MA band. Technical indicators are also bullish.
Appears ripe for a bullish relaunch!
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On a side note, and non-chart related, I just liek to mention something now, that should help in chart reading for anyone.
You see, many have told me about China, its severe lockdown, its impact on the economy, and such. I get all that, and I do agree to some extent. These fundamental and geopolitical aspects do form a part of my analyses as well; or at least I look for alignment.
This is after all, part of critical analysis over technical analysis... the art in the science.
Another aspect I would also like to point out is that biases can be very entrenched and catch us unaware. Even to me it happens, despite being aware about it. You see, I opine that China knows something about the CoV2, and their economy. 5000 years of histroy did not go to waste. IF at all, China learns much more from their rich history than any other IMHO. Bearing this in mind, I find myself asking what is it that they know that I do not yet know. While not getting the answers with clarity, it allows me to think out of the box. And particularly, deviate from Western media and thinking that China this and China that... I do not disagree with their assessment, or reporting, but I find that a large degree of biases are infused in the analytics. Hence I form my own, and dare to deviate where required.
Again, adjustments are made, when and where necessary. So... do think about these points when we assess another country or economy, or commodity for that matter. In the longer foreseeable future, I really see China doing better than most of the (western) world.
(possibly add Russia into that, but it is way too early and another story for another time)
Stay safe and well!
China ETF GXC finding its foot to launchThe China ETF, GXC, has in recent weeks been beaten down. This is great part dur to concerns about their ideology about a Zero COVID strategy, where it comes with great economic costs. The Western media (mostly) has had a field day whacking China on their "primitive" idea, saying that it is impossible, it is unreasonable, it is irrational, etc.
I beg to differ...
The saying... "Do not listen to what people say; watch closely what people do" is apt for application here.
China has an idealogy it is willing to play out. It also indicates that there is something about CoV2 that they might know, which if true, are not telling the rest of the world about it. And as the world is in bewilderment, makes a laughing stock of China, I do beg to differ. Something deep, something beyond what meets the eye is underlying this hidden dragon.
Meanwhile, with bated breath it can be observed the Chain equities have been beaten down... as Shanghai is locked down, and Beijing is at risk of being locked down too. Thing here is... intently watching and looking for a bottoming, it is observed that it might be just starting to break out to the upside.
The GXC Daily chart is showing a pick up in Money Flow, MACD and RPM are starting to synchronously push upside. Still early days, but with turning indicators, and as price closed the last day of the week above a consolidation range, it is encouraging
Would be looking for a triangle / trend line breakout, with indicators breaking out into bullish territory. The next two weeks would be critical to watch closely.
Zigzagging FXI.Goals33, 32. Invalidation at 47 .
We are not in the business of getting every prediction right, no one ever does and that is not the aim of the game. The Fibonacci targets are highlighted in purple with invalidation in red. Fibonacci goals, it is prudent to suggest, are nothing more than mere fractally evident and therefore statistically likely levels that the market will go to. Having said that, the market will always do what it wants and always has a mind of its own. Therefore, none of this is financial advice, so do your own research and rely only on your own analysis. Trading is a true one man sport. Good luck out there and stay safe
GXC... perhaps it is timeSo, the double tailed candles on the weekly chart only resulted on a week of downside, but the second week proved resilient.
The daily chart shows the spike down blowout and the immediate recovery. This indicates very strong support at about 98-100. The new interim support at 102 is holding too.
Now, I expected the lack of liquidity and sentiment to push lower, accentuated by the Chinese New Year absence of market participants. But this appears to be a subtle bullish hint that once the two week holiday is over, this dragon will fly... am expecting a test of the daily 55EMA, maybe even popping over the resistance (white line). Daily technicals are supportive.
$FXI — SHORTDrop in vlume on the way up, doji forming, gaps open below the market, oscillators wayyy overbought — this is ripe for puts and I bought puts on BABA.
I.T. cycle low do NOT be Short in anything in chinaIt seems that another cycle low is coming in look for a rather sharp bear market rally in baba and fxi for a week
A Spectacular Dip Buy Chinese Stock Exchange Chinese #FXI Large Cap ETF ready for a dip buy around here and I will be watching for the triangle to breakout above the red line.
Here are the top 15 holding of the ETF:
Symbol Holding % Assets
3690 Meituan Class B 9.51%
700 Tencent Holdings Ltd. 9.08%
9988 Alibaba Group Holding Ltd. 7.49%
939 China Construction Bank Corporation Class H 5.92%
9618 JD.com, Inc. Class A 5.39%
2318 Ping An Insurance (Group) Company of China, Ltd. Class H 4.21%
1398 Industrial and Commercial Bank of China Limited Class H 4.11%
9888 Baidu, Inc. Class A 4.06%
2269 Wuxi Biologics (Cayman) Inc. 4.02%
1810 Xiaomi Corp. Class B 3.39%
1211 BYD Company Limited Class H 3.31%
9999 NetEase, Inc 3.29%
3968 China Merchants Bank Co., Ltd. Class H 3.05%
3988 Bank of China Limited Class H 2.69%
2382 Sunny Optical Technology (Group) Co., Ltd. 1.92%
The Ending of an Era - HSIOriginal Chart This is Based Off
2018 update
Original Trade Strategy Around This Chart
Everything should be self explanatory in the chart. Of course - this will work until it doesn't, but since the 1990, the HSI index hitting its upper resistance line has nailed every major global market top within a very short timeframe. You can see how perfect this has timed markets with the correlation to the SPX index in the lower chart. Hypothetically speaking, when you would hit the upper resistance line, you would short emerging markets to hedge against whatever is about to happen. Then when this hits the lower resistance line, you would go long major market indexes until you arrive back at the upper resistance line (SPX, etc).
2022 - End of an Era?
As most can see, this chart is a very very long narrowing wedge / channel. The volatility between drawdowns and rises was far greater the further back you go, and the drawdowns have all been proportionally smaller as we narrow within the channel bouncing off top and bottom resistance (and sometimes in between). With that said, narrowing channels like this indicate increasing fragility of the trend, and potentially suppressed volatility. Eventually, something has to give, and this will break the long term pattern.
I believe we're close to that point, and that's not a good sign for asian markets. I don't know exactly what would happen if this breaks to the downside, but I don't think it would be pretty. Stable systems such as this have a way of becoming extremely chaotic when the stability breaks. Chaotic markets = drawdowns / crashes, and given the current state of Chinese markets and politics, this shouldn't be too surprising that it could be possible. The ongoing Chinese real estate crisis is just getting going, and the party has so far remained committed towards deflating their real estate bubble. Fundamentally, Hong Kong is just as bad if not worse than China from a real estate speculation / valuation perspective, yet there are additional problems in HK with people fleeing the territory due to the Chinese takeover following the 2018 protests. Demographics are strongly against this market, valuations are strongly against this market, and the current economics of this look rather dire without any major positive windows into future development / growth.
From a technical perspective, this is also far weaker than every other time it's hit the bottom resistance line. Note that every other instance we hit the lower resistance line, we also were hitting the lower monthly bollinger band at the same time. Not included within the chart, but momentum indicators also are showing a lot of negative divergences. You can see this from simply looking at the chart and noting the covid recovery bounce has been far weaker than every other post-lower boundary recovery bounce. We didn't even make it up to the middle resistance line before retesting.
My guess and view is that this won't break easily, but it will break dramatically. I think there is a good chance we see another rally here back towards one of the resistance lines, but after that, momentum will have really worn off. I also think we could chop around the lower resistance for a while, but ultimately, we are likely going to break down here on a secular basis. Maybe Kyle Bass will actually be validated after being wrong for 10+ years (except he's probably already been stopped out of all his poorly timed trades)?
China LArge Cap ETF short term boost to higher highs. FXIAppearing to be a beginning of the Y in WXY in an otherwise complex correction. This is just a result of just the same as nothing can grow exponentially, nothing will fall unstoppably without seeing some respite from time to time.
We are not in the business of getting every prediction right, no one ever does and that is not the aim of the game. The Fibonacci targets are highlighted in green with invalidation in red. Fibonacci goals, it is prudent to suggest, are nothing more than mere fractally evident and therefore statistically likely levels that the market will go to. Having said that, the market will always do what it wants and always has a mind of its own. Therefore, none of this is financial advice, so do your own research and rely only on your own analysis. Trading is a true one man sport. Good luck out there and stay safe!
GXC: China Equities going to break out...The GXC Weekly chart is about ready to break out and take off... just did a best case projection.
This is on the back that the Evergrande saga endgame is delayed, which I think would likely be so... into 2022.
Watch the next two weeks or so, needs to break out of trend line/channel and clear the gap resistance area.
Pairs trade with FXI and EEM**Spread Trade***
An opportunity to initiate a pairs trade by buying FXI and selling EEM. Spread between both etfs grew substantially (over two sigma), spread should start narrowing make sure you execute trade using ratio of both prices.
For instance, you could go long fxi 26 units and short EEM 20 units (capital 2000usd)
Chart symbol of spread —> input the following in the symbol box: FXI - EEM
$SOHU: China Come Back Poster Child?SOHU has been showing terrific relative strength against a basket of other Chinese ADR's and the KWEB etf. Last quarter was a 400% earnings upside surprise, and technically speaking, you could look at this as a large cup and handle pattern trying to break to the up side. At symmetry here, could this be a tremendous value buy? Or will the CCP keep up the antics? Stay tuned!
China ETF GXC - the music ain't overRecently, the China market had dived on regulatory action over the past couple of weeks. It hit a low point way out of range, and then bounced back technically. And the past week saw a range bound attempt to break out. This attempt failed to extend the rally higher out of the range, but instead fell down to the range support. In the process, it left a gap support and held above this in a range.
The weekly chart has a rather unique candlestick pattern, where a long tailed hammer body is engulfed by a down candle. This is ominously bearish.
The Daily chart is no better, with a failed breakout, and a gamp down to follow through, ending the week at support with ailing technicals.
A revisit to the last low is due...
More downside incoming!
Watching Chinese Names and ETFs - FXI $42 Early Next Week?BABA reports next week 8/3;
likely gives a catalyst for a move up to $210-220 for BABA and then a move for FXI to $42ish
(Opinion only)
