In the jobs report released Friday morning, the U.S. Department of Labor said non-farm payrolls rose to a seasonally adjusted 162,000, from 188,000 in the previous month and this figure was revised down from 195,000. On the other hand, the unemployment rate fell to 7.4%, its lowest level since December 2008.
This is good for our markets as the S&P large cap index has broken above the 1,700 level recently, but how are the other markets performing this year on the other side of the Pacific?
CHINA VERSUS AMERICA
The daily chart of the Shanghai Stock Exchange Composite Index (SSEC) shows a large breakdown in June and then has formed a triangle consolidation in July. The first key resistance is set at 2060 and a breakout here is needed to put the bulls back in control.
The indicator window shows how the Shanghai Composite relative to the S&P 500 has moved to a new low in July. The SSEC has underperformed our broad index this entire year.
Although this market looks as if it can continue falling, in the month of July it seems to have found some kind of a bottom, from which the price has started to bounce.
ETF PLAY
One Exchange Traded Fund that is very useful to trade this market is the iShares China Large-Cap ETF (FXI). This ETF seeks investments results that correspond to the price and yield performance of the FTSE China 25 Index, which is designed to represent the performance of the largest companies in the China equity market that are available to us international investors.
This ETF consists of 25 of the largest and most liquid Chinese companies, which are all listed also in the Hong Kong Stock Exchange.
The sector breakdown is as follows: Financials: 52.34% – Telecommunications: 16.75% – Oil & Gas: 11.93% – Technology: 7.03% – Basic Materials: 4.33% – Consumer Goods: 3.23% – S-T Securities: 2.56% and Industrials: 1.45%.
On the Vantage Point chart we can see how the fund has picked up from July onwards with a strong Long Term Crossover. The Williams EMAI shows good accumulation here as well as a growth in the underlying strength on the Predicted TSI.
BOTTOM LINE
With all the bad data and news coming from China this past year, some of us have stayed away from this market waiting for it to recover some of its strength. At first, one could believe this is just a bounce from the hard drop that we’ve experienced in this market, but what if it’s a proper turnaround and we once again start reinvesting in China?
