This market really does seem unstoppable.
My goodness, what a rally after the slight pullback on Thursday. (That I called the day before!)
Couldn’t hold this market down, though.
I personally think a “healthy” market has to have a few downticks.
It gets scary when something just keeps trading higher and higher, without pause, especially at the top.
Because the fall from up there can be steep and fast.
So, at least a little bit of a follow through on Thursday’s pullback would be in order.
But what could bring us down?
China did a pretty good number on its stock market by cracking down on its largest tech companies.
Like I said the other day, our American tech companies are getting a bit too big for their britches …
But our moronic Congress people have no idea what questions to even ask when they have the tech bigwigs “under fire.”
I say, “under fire” — it’s more like Where’s Waldo?
So, comparing the Chinese Large Cap ETF (FXI) with our own S&P 500 3-year charts, you can see that when China makes a considerable down move, so do we.
Now, the FXI is much more volatile than the S&P …
But as you can see above, since its top in February, the Chinese exchange has experienced a 21% downturn while SPY has continued to march higher.
That’s a divergence …
And could this Chinese company be a catalyst?
Ain’t It Grande?
Evergrande (EGRNY) is a very large — and very indebted — company causing China a lot of trouble.
It has 1.95 trillion yuan or $302 billion in total liabilities.
EGRNY came close to financial disaster in September 2020 and again last month …
Now the question is, will it be able to stay afloat with help from the Chinese government?
Bloomberg described Evergrande as, “the world’s most indebted real estate company and one of the world’s most systemically important borrowers in China.”
You can be sure trading desks from Hong Kong to New York are keeping their eye on Evergrande.
Is it too big to fail?
Will China allow its banks to keep saving it?
Time will tell.
Although the Chinese Large Cap ETF (FXI) has been selling off, I think the Chinese company JD.com, (Ticker: JD) is making a comeback.
Check out the stock chart:
JD closed at 73.56 on Friday, and I think it will trade back to $80.
Looking at the size of these candles, this stock is a mover and a shaker — and I think it could move by the end of next week.
I will be looking at the July 16 just-out-of-the-money calls, which are the 74-strikes.
As long as JD opens and trades higher on Monday, I will pay up to $1.20 for the July 16 74s.
If it trades over $2, I will take my profit.
If it trades down to $.80, I will exit.
Thanks for Reading … See You Next Tuesday!