____________
Shorty, we’re going to China!
The high momentum China stocks are on fire this morning, namely ONP RINO HEAT CMFO CCME. Perhaps what is most bullish about the action in those names is that not they are merely bouncing from oversold conditions. Instead, they are breaking out of multi-week, or even multi-month, bases.
I am fully aware that the temptation here is to proclaim, “The high beta, small cap China names are running fast and furiously. Therefore, the market is topping out because of such complacency with respect to risk appetite.”
However, that type of mindset would have seen you shorting this market last week, when the cloud-computing and data storage names were cratering, yet the broad market was holding up sturdily. Remember, it is not always WHAT the market is doing, but HOW it is doing it. Thus, price action, volume, and general principles of technical analysis/mass psychology are going to trump old Wall Street axioms.
In the case of the momo China stocks, as seen in a few examples of their charts below, I believe these are bonafide breakouts, as opposed to one-day wonders. Again, these stocks are breaking above sound, healthy bases on strong buying volume. From my vantage point, that type of action does not signify the irrationally exuberant behavior by market participants that you would expect to see at a market top.
___________
___________
___________
Comments »