Daily Market News - 7th July 2022
Did China Bottom Already?
In this weeks letter I’m going to elaborate on my letter 2 weeks ago where I casually mentioned China could have bottomed.
The charts in China and the data make for interesting reading so let’s dive into it and let’s start with the performance of China over the last 3 months.
Relative Comparison Chart
It doesn’t take a PHD in Economics to understand the S&P500 (SPY) and Technology (QQQ) have been smashed these last 6 months, but what I find interesting is the relative performance of China.
For no other reason than it’s where we can find alpha.
We can see the Shanghai Composite has posted a +3.67% return over the last 3 months vs the S&P and QQQ returns of -14.56% and -18.44%.
I’ve had a few emails / social media messages asking me why after 3yrs I’m now posting Chinese charts again so lets take a look at China Tech, because that’s likely what you’re most interested in.
Chinese Internet (KWEB)
For those that don’t know what capitulation looks like (something many think the S&P500 will need to endure to find a bottom), back in March Chinese Internet bottomed on the worst possible news and the start of the Ukrainian / Russia war.
My work is currently focused on finding these type of charts for our clients/members in the US Markets and the opportunities that massively over sold conditions provide us.
I like capitulation. It provides opportunity.
That said, we’ve already had capitulation in KWEB and if that breaks out, it could get mighty interesting despite all the negative headlines.
What would that mean for something like Alibaba?
Alibaba (BABA)
In case it’s not something you pay attention to, BABA reached an overbought condition a few weeks ago (something I highlighted a few weeks ago) and while Alibaba is absolutely NOT the most interesting stock / company in China for me, it’s the obvious name to cover for many of you. Again, potential base bottom.
Bottom line, for me, China’s interesting once again.
I laid out a bunch of charts below at the weekend in out free monthly social media analysis on YouTube also.
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