The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
ETF Expert) -- The SPDR
S&P China Fund
(GXC) fell 37% from an April high to an October low. That was nearly twice the top-to-bottom devastation for the
S&P 500 SPDR Trust
(SPY). What's more, the dramatic selloff across all China ETFs met the commonplace definition of a bear market -- a 20% drop from the peak.
Often, commentators and analysts use technical data to confirm bearish trends. For instance, when the 50-day moving average for GXC crossed below its 200-day moving average in July, the "death cross" signaled the likelihood of a downturn.
Yet few seem to be talking about whether or not China has turned a corner. In fact, prior to the beat-down in the last hour of Wednesday's trading, GXC had risen 24% off an October trough. Is the over-20% move to the upside worthy of the description, "New Bull In China?"
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Perhaps not. Technicians would note that the 50-day moving average has yet to cross above the 200-day moving average; the "golden cross" would confirm a new bullish uptrend. It is evident from the chart above, however, a cross-over event would take some time.
In brief, 20%-plus gains hint at a new bull. Yet confirmation in the form of a "golden cross" seems like a distant confirming indicator. Might there be a reasonable means for settling the current discrepancy?
Perhaps the simplest confirmation would come with the current price of GXC closing above its 200-day. At present, this would require GXC to rise 12.8%, then "tow the trendline."
Although 12.8% moves don't necessarily happen overnight, Wednesday's shellacking alone cost GXC 3.6%. Indeed, there have been scores of 3%, 4%, 5% moves for China ETFs over the last 6 months . . . so I wouldn't be shocked to see GXC break free in a late November-early December rally.
Naturally, a great deal rides on eurozone particulars. If the PIGs (Portugal, Italy, Greece, Spain) show modest progress - and if the U.S. government's "super committees" can do the same -- there's no reason to doubt a happy ending.