The CSI300 index of leading stocks trading on the Shanghai and Senzhen exchanges in Mainland China has declined more than 20% since February. The Hang Seng in Hong Kong has fared just as badly, exclaims Ian Murphy of MurphyTrading.com.
Both indices are now “officially” in a bear market as the decline exceeds 20%, but I prefer to gain a technical perspective.
Looking at weekly charts, the indices closed below their respective -1ATR lines on Friday (pink arrows) and stayed there at the close today confirming the bearish trend condition, a measure which carries more weight in my opinion.
This matters because the clampdown on tech firms by the Chinese government has caused global investors to rethink their holdings in Chinese stocks. Funds transferred out of China have very few places to go which might offer a return on investment, except European and US equities and these are already starting to look overcrowded.
European stock markets pulled back last week in tandem with US markets but were trading broadly positive this morning before the US regular session opened. In fact, the STOXX600 index, which tracks about 90% of European market cap across 600 firms in 17 countries was trading back in bull territory on a daily chart for a period this morning (pink arrow).
US equity markets are green across the board (so far) and I will be looking for a confirmed Help Strategy trigger today. In addition, there are 85 potential triggers on the FBD Strategy after 15 minues' trading, so one or two viable trades should pop up. These are drawn from a watch list of stocks making new monthly, weekly, and yearly lows so it’s also an indication that a bounce in US equities is occurring across the spectrum.
Learn more about Ian Murphy at MurphyTrading.com.
