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

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 its highest level 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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