1/16 Daily Market Note: U.S. Double Top Emerging
China and Hang Seng on course for multi-year low close
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Hi Everyone,
Hope you had a good long weekend. Mine was very relaxing as I spent a lot of time reading (for learning and for fun). Stay tuned as I build out new focuses to help our Community navigate 2024’s tricky landscape.
We come back from Martin Luther King’s long weekend to see the Asia Session’s Hang Seng make a break below its critical ~16,000 area. China stocks continue to be mired in a cycle of pessimism and fear, and although I’m upbeat long-term about China, I cannot fight the near-term trend and shared that sentiment a few weeks back as weakness began to become clear.
The constructive news is that Hang Seng’s downside continuation isn’t necessarily a surprise (as shared on Twitter here), and that a bullish reaction at the 14,700-15,000 lows is likely in store (if it gets there). However, that’s still 1000 points away before I can step up any constructive opinion. Playing Defense has been a major theme since early/mid January in China and I continue to believe Defense is the only way to manage China for now.
China will rip higher in a ferocious manner for another tactical trade at the right pivotal point. As of this moment, that setup is not yet available based on my observation. Roughly 1000 points lower for the Hang Seng, and I think we get a big reaction rally. Do note, China is famous for having rallies that last 1 day (or 2 if we’re lucky). When any advance comes, it comes all at once.
In U.S. markets, I noted to our members in the premarket WhatsApp group that I was looking for subdued action today unless I saw 4835 taken out on /ES (proxy for S&P 500). As of this post, U.S. markets are characterized by subdued action. Not anything dramatically bearish though. At least not yet.
In this post, I will briefly share my thoughts on recent Orderflow in the S&P 500.