Evergrande Gap: warning or missed opportunity?
Last week started with fears of a default by Evergrande (OTC 🙂 (China’s leading real estate developer) fueling a technically damaging gap. Monday morning’s spread put the and well below their 50-day moving averages (DMA), the well below its 200-DMA and China’s large-cap ETF () to a new low 52 weeks.
SPY Daily Graph
Global equity markets rebounded quickly with US stock indexes leading the way, most notably led by Grandpa Russel (IWM), which closed up + 2.79% for the week.
US stocks have also ignored the possibility of a US default.
The rebound was helped by additional fuel from oversold last week, and that currently means a rollback.
So the big question remains …
Is it mainly a technical rebound that will soon run out of steam or the start of a more substantial movement that will take to new heights?
Is the energy sector which led this week (+ 7.8%) indicating a robust economic recovery?
This week’s market highlights:
- Risk gauges returned to full Risk-On function
- The main indices have been oversold and are in mean reversion mode
- Long term trends of major indices are still intact based on weekly charts
- Volume Analysis Shows Return To Neutral After Massive Sales Over Last Two Weeks
- The 4 key indices have all increased by at least 2% in the last 5 trading days. However, they are still down around 1.5% from last month.
- Market insiders including the McClellan indicator on SPY have rebounded from heavily oversold levels and are now back in positive territory
- Small caps (IWM) and mid caps () have returned to their 10-day moving average, 50-DMA and 200-DMA placing them again in bullish phases
- SPY returned to a bullish phase as soon as Friday closed by erasing its 50-DMA
- Volatility () shows that sentiment is returning to Risk-On mode
- Value () continues to lag Growth ()
- Semiconductors () and biotechnology () continue to be the leaders of the modern family
- With interest rates under pressure, the Regional Banks () seem solid and are back in a bullish phase
- Compared to foreign equities (EEM & EFA), the United States (SPY) has regained its leadership
- Gold () remains under enough pressure, and in a bearish phase
- The energy sector comprising () and () dominates the market
- Crude Oil (USO) hits highest levels since March 2020
- Long bonds () fell dramatically this week as they attempted new highs, likely battered by taper talks
- Despite the Evergrande fiasco, China () closed at + 0.13% for the week
This week’s CryptoPulse highlights:
- For the third time in 2021, China enacted another blanket cryptocurrency ban. This time, China is banning foreign trade from serving Chinese traders.
- (BTC) and (ETH) are down more than 10% in the last 7 days
- There are still booming tokens in the decentralized finance space as Avalanche () and Tezos () both gained over 6% on the week despite Ethereum pulling out.
- Although it became mainstream by being listed on Coinbase (NASDAQ 🙂 for trading, Shiba Inu () suffered a 14% drop over the week
- Watch for BTC to maintain the $ 40,000 support level and ETH to return to the $ 3,000 level before Monday
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