Hence, based on the technical charts, the China Leaders ETF appears to have broken out of a minor base formation at $1.42, setting an upside of around $1.53 to $1.54. The caveat to the target is that prices should not fall below $1.42 by April 8.
On the other hand, mainland tech stocks are still facing challenges, both technically and fundamentally. As a result, the Hang Seng Tech Index — where the largest stocks include the likes of Xiaomi, Tencent and SMIC — has had difficulty clearing its base formation and resistance at the four-times tested level of 58 cents. This establishes 58 cents as a pretty formidable resistance for the HS Tech ETF.
A shooting star which formed on March 25 at the SPDR S&P500 ETF which was flagged by this column on March 29 has indeed led to a consolidation phase. Subsequently, the black candle on April 3 was accompanied by an unusually large volume, a sign of selling. In addition, the minor accelerated uptrends criss-crossing at US$521.8 ($703.35) appear poised to be breached as the SPDR S&P500 is trading at US$520.5 on April 4. Support appears in the US$500 to US$510 range. Since the retreat has lasted for more than three days, the entire consolidation period could be as long as three weeks.
Part of the reason the S&P500 Index is set for a consolidation is the still resilient US economy and stubbornly high inflation rates. The final reading for 4Q2023 GDP in the US was revised higher to 3.4% from 3.2%. “This reflects the continued resilience of the US economy. It is encouraging that this upward revision primarily came from consumer spending and non-residential fixed investment,” says a Global X ETF Market Screener update.
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From a stock-investing perspective, it is encouraging to see this continued resilience, the update says. The reading for 1Q2024 GDP is at 2.3%, adds the Global X ETF note, with solid labour and inflation data supporting expectations for continued resilience.
Additionally, US manufacturing activity expanded in March for the first time since September 2022, coming in well above expectations, the Global X ETF note says.
China’s Caixin Manufacturing PMI also came in above expectations as Chinese exports rebounded in January and February. This is rekindling hope that foreign demand can broaden the Chinese economic recovery, Global X ETF says.
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What would help the stock market is if foreign demand piles back into mainland equities and that appears to be materialising in small steps.
