Groupmark China Index Advance Decline Line
Here’s a closer look at the advance decline line. (For some it may be a bit too close)
As the market was moving higher in April it was accompanied with more of Groupmark China Index components advancing and fewer declining on pull backs (see A,B,C, and 1, 2, 3,4). This was again confirmed as we pushed through our 200 day moving average (see D). More recently on the last pull back to the 200 day (that supported) it was accompanied with a sharp rise in declining stocks (see 6). And now finally with this last move into new highs the number of advancing issues did not exceed its previous peak (see D, E). This could be a sign the index will at least consolidate, and at worst begin a correction.
As Groupmark continues to be bullish on the long-term outlook of the Chinese economy and ultimately that will translate into the Chinese companies continuing to outperform most others in the world, we don’t recommend the buy and hold strategy. Too often small corrections turn into major routes giving up all the hard earned profits. Tighter stops, trimming position or hedging is in order when technical indicators weaken.