Cabot China Timer Gauges Trend of Emerging Markets Stocks
By
Paul Goodwin, Analyst and Editor of
Cabot China & Emerging Markets Report
The Cabot China-Timer is a trailing market indicator that uses the
performance of the Halter USX China Index to gauge the trend of
emerging market stocks.
The China-Timer is considered to be
positive when the Halter Index—which is composed of over 90 Chinese
stocks that trade on major U.S. exchanges as American Depositary
Receipts or ADRs—is above the lower of either the 25-day or 50-day
moving average. When the Index falls below both its 25- and 50-day
moving averages, the China-Timer turns negative and the Cabot China
& Emerging Markets Report adopts a defensive stance. The
China-Timer will not be considered as having turned positive until the
level of the Halter Index once again moves above either the 25- or
50-day moving average, and that average is itself trending upward.
While
the Cabot China-Timer is based entirely on the movement of the Chinese
ADR market, it is considered to be a proxy for the general level of
risk tolerance in investors. If investors are leaving Chinese stocks,
they will also be exiting Brazil, Russia, India and the other emerging
markets.
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