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A Taste of China for the Bold Buyer
"So much cash in the market also means more volatility. Blaze Fabry, president of the Chinavestor research firm, estimates that U.S.-listed Chinese stocks are 2½ times as volatile on average as their American counterparts." Read article
By Kimberly Palmer, October 11, 2007 |
Good morning,
if you live in the U.S., your morning may turn out better then the rest of the world today. Hang Seng lost 505.68 points or 1.84% while the Nikkei edged lower 107.40 points or 0.62%. Europe is mixed, DAX and CAC-40 are both down with the FTSE in London bucking the trend.
The good news is coming from the U.S. this time: Stock futures pointed toward a higher open on Wall Street Thursday as investors awaited readings on factory orders and weekly unemployment claims. The Labor Department's report on jobless claims for the last week of September will be closely watched ahead of the much-anticipated data on September job creation, which comes out Friday. A strong job market has been an important prop for the U.S. economy, helping to offset investor concerns over a housing slump and sluggish growth.
08:03 am : S&P futures vs fair value: +2.0. Nasdaq futures vs fair value: -3.0. Futures are mixed as focus is on tomorrow's employment release rather than the limited batch of news this morning. (Briefing.com)
Keeping that positive sentiment in mind, let's take as look at the Chinese ADRs from a pure technical point of view. As the following script from the "Pre-Market Report" reveals (this report is available for Advanced subscribers on a daily basis), U.S. listed China stocks are reaching a peak. Almost 90 percent of the China stocks we cover are trading above 20- and 50-day-moving-averages or DMAs. The only comforting measure we see is the relative strength indicator or RSI. As the chart suggests RSI is just below the magical 70 measure, giving investors a feel that there is no bubble.
As a result, a healthy correction is likely but this will not break the overall trand for the rest of the year. China stocks, backed by strong fundamentals, are poised to keep rallying for the rest of the year. Remember, short-term corrections are just part of the game.
Note: looking at the Overbought/Oversold report this morning, all China ADRs are retreating but HSBC (NYSE:HBC). Watch out for this global bank today. You may get surprised...