Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

Tuesday Midday Color

Jason Goepfert
2019-02-26
null

Here's what's piquing my interest so far today.

China Surge

Yesterday, we looked at a couple of different metrics related to the move in Chinese stocks. With more data becoming available, its importance starts to stand out a little more.

Within the approximately 1500 stocks in the Shanghai Composite, more than 60% jumped above their upper Bollinger Bands. This kind of impulse triggered losses over the next month every time (tiny sample size). Longer-term, two of the three unique occurrences preceded longer-term bull moves.

The thrust has also moved its McClellan Oscillator to one of the highest levels in 15 years. Other high readings led to short- to medium-term pullbacks.

A remarkable 80% of the stocks just hit a 1-month high, a level seen only twice before in the past 15 years.

There has also been a surge in the stocks at 3-month highs and with an overbought RSI, which occurred more frequently and with less negative forward returns, but those tended to occur after the initial surges out of a low like we're seeing now.

Closed-end funds can be useful for determining retail trader sentiment, and one of the more popular funds that focused on Chinese A-shares is now trading at less than a 10% discount to assets. Over the past few years, that has coincided with peaks in optimism. Note that in some prior years, this actually traded at a premium, so it can get much more extreme.

One thing that's probably not a worry? Margin debt. The WSJ asserts that retail investors are back due to a surge in margin trading. But new margin accounts (top pane) are still moribund, and that big uptick in margin debt barely registers on the long-term chart.

Not Perfect

Breadth has been remarkable across markets and sectors, with thrusts like the % above the 50-day average getting so much attention one has to wonder if it's too much attention. Then there are things like a new high in the advance/decline line, which is being taken as gospel that it's a good sign. It usually is, but often fails, too. See the February 25 Daily Report for full details.

Even if we only include stocks, within the S&P 500, cumulative breadth was excellent in 2001...and would have had us buying all the way down. Just a reminder that nothing's perfect, especially things that are taken for granted.

Just Take My Money

The Wall Street Journal noted that there was a surge in blank-check IPOs last year. These are open-ended securities where investors give money to the operators to basically do whatever they want. We only see demand for these securities during periods of extreme risk appetite. A rolling 12-month sum of these IPOs is only now starting to curl lower.

Emerging Strength

The cumulative advance/decline line for emerging market stocks just broke to its highest level in almost 9 months. The MXEF index is still more than 3% below its own 9-month high.

Potentially positive divergences like this don't always mean what they're supposed to, but in this case it has been a good sign. Since 1995, similar setups have only occurred twice, both leading to further sustained upside for emerging markets.

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.