Chart of the Day - Wednesday, March 4th, 2020

Today’s Chart of the Day was shared on Twitter by Greg Rieben (@gregrieben). The chart compares the performance of the Chinese Technology ETF, $KWEB, to the Nasdaq 100 index, $NDX, since the August 2019 lows. Most market participants are convinced that last week’s decline was a direct result of the coronavirus. We think it’s silly to get too attached to the narrative that stocks are selling off because of the coronavirus. If that were the case, then you’d expect Chinese stocks to be underperforming US stocks, as China has been ground zero for the epidemic, right? Well, believe it or not, Chinese stocks have been outperforming US Stocks. As Greg points out, the Chinese Technology ETF ($KWEB) is up about 31% from the August lows, while the Nasdaq is up about 18%. The outperformance of Chinese Stocks vs. US Stocks isn’t just isolated to Tech. It’s happening more broadly, as the China A-shares ETF ($ASHR) is up about 13% from the August lows, while the S&P 500 ETF ($SPY) is up 7% over the same period. Before last week’s crash, there were numerous bearish divergences and technical warning signs suggesting the market was due for a sell-off. All that was missing was a catalyst or narrative. We believe it’s far better to listen to what the market is telling you rather than what the media is telling you.