Chart of the Day - Monday, August 28, 2023

Today’s Chart of the Day was shared by Alfonso Depablos (@AlfCharts). Chinese stocks are starting to appeal to contrarians as the telltale signs of extreme pessimism emerge. This week's cover of The Economist features a caricature of Xi Jinping  riding a half-snail half-dragon creature with the caption: "Xi's Failing Model: Why he won't fix China's economy." It's not just The Economist showing hate for Chinese equities. Jason Goepfert of SentimenTrader pointed out today that the number of negative news articles on China is at a record high. Despite the bearish narrative, Alfonso shows that the Chinese Internet ETF ($KWEB) has reclaimed support at $26.50, and has formed an inverted head & shoulder pattern. Contrarians aren't necessarily betting Xi will save the day, but rather, they're betting that the worst has already been priced in for Chinese equities.