China

Strong but Normal Pullback

Pessimism around Chinese stocks is high. Naturally, I’m not a fan of a capitalist stock market within a communist system, especially considering how Russian ADRs became nearly worthless for regular investors. I see similar risks with Chinese stocks, particularly in the event of conflicts between China and the U.S. in the Pacific. That's why I will limit my exposure to Chinese stocks to 10% of my portfolio.

From a technical perspective, China looks promising. Short investors remain active, offering potential for dynamic price surges through short coverings. The pullback to the old downtrend was almost textbook. I expect the last price gap to remain open, as the volume in the KraneShares China Internet ETF decreased during the pullbacks. I chart this ETF frequently, as it helps gauge how U.S. investors are behaving, providing some insight into reducing political risks. Overall, I’m optimistic about the market and expect volatile rises in the coming weeks.