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EWI InsightHosted by Matt Lampert
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Pop quiz. Can you think of a major equity index that's above its January high? There's only one: the Shenzhen Composite Index in China, a country at the epicenter of the disease outbreak that we're told is responsible for sending global markets lower. Raises an eyebrow, doesn't it?
The Shenzhen is kind of like the Nasdaq of China. It's where you'll find China's big tech companies. Since its February 4 low, it's up more than 25% as of yesterday's close. Can you believe that? A 25% rally in three weeks for an equity index!
And let's consider the ChiNext. It's an index of Chinese small caps. What are we reading in the news? That small businesses in China are struggling because of the coronavirus. Some of them might close. Yet their stocks soared more than 29% since the February 3 low.
Of course, markets do not go in straight lines, so check-in on the near-term wave structure. It wouldn't be surprising to get a pullback. And people might say, well, maybe the outbreak is getting better in China. But look, these moves have happened over the past three weeks. From a conventional perspective, If the outbreak is going to wreck any market, you'd expect it to be the markets in the country most ravaged by the outbreak. And that simply did not happen in China as the virus spread globally the past three weeks. Global markets have sold off, but it has nothing to do with the outbreak.
Global selloff got you worried? EWI's Global Forecast Service can help. Subscribe now and get instant access to the webinar, "Coronavirus: Opportunities in the Chaos." Click the link in the show notes or visit elliottwave.com/insight for details.