iShares China Index ETF (XCH.TO) & Crude Oil Continuous Contract (CL.F)

It has been quite a week in the markets so far. With growing signs of trade de-escalation, markets continue to “grind” higher, fueled by increased hopes that trade disputes will be resolved, as the U.S. administration continues talks with other countries, including China, on new trade agreements. Coming off the significant trade truce relief rally that saw many global markets post gains, let’s examine how various regions have performed over the past week.

Mainland China (FLCH) rose 5.09%, while Hong Kong (FLHK) added 3.05%. Meanwhile, the United States (FLQL) gained 4.44%. Latin America led the way, with Argentina (ARGT) soaring 9.25%, while Peru (EPU) was relatively flat, up just 0.58%. Canada (FLCA) posted a 1.02% gain. Europe followed with broad-based strength: Spain (EWP) rose 0.9%, and Italy (EWI) advanced 2.82%. Australia (FLAU) gained 1.26%, and regional names like Indonesia (EIDO) were up 1.64%.

On the economic news front, U.S. economic reports were mixed this week. Headline retail sales slightly beat expectations (0.1% Street 0.0%), while sales excluding autos fell short (0.1% vs. 0.3%). U.S. producer prices suggest inflation remains benign for now (2.4% vs. 2.5% expected, and down from the previous 2.7%). The Empire State Manufacturing Index (-9.2 vs. Street -10.0) and the Philadelphia Fed Manufacturing Survey (-4 vs. Street) were not as bad as feared, though both remain in negative territory. US consumer prices were slightly better than expected (2.3% vs. Street 2.4%), indicating inflationary pressures remain stable for now.

In this edition of the Equity Leaders Weekly, we will examine how China Markets are performing under the current 90-day tariff pause with the US. We’ll also take a look at the Crude Oil Continuous Contract (CL.F) to assess where oil prices may be headed.

Lets take a look at the China Equity markets by examining the iShares China Index ETF (XCH.TO). XCH.TO provides exposure to equities of 50 of the largest Chinese companies, by market cap, in a single fund.

In looking at the point and figure chart of XCH.TO at a 2% scale for an investment grade analysis, we see a strong 3 year downtrend in place from February of 2021 to February of 2024 when the shares finally found a bottom at the $13.50 area. Then, the following month in March of last year the trend reversed with a strong rally from that point on until March of this year coinciding with China’s attempt to prop up their economy with their own quantitative easing program. The shares hit a ceiling at the $26.00 area in March as the tariff war with the US administration began to take hold. In April we see a strong downward column of O’s lasting 13 boxes appear before the shares reversed this month and a new rising column of 8 X’s has formed when the 90 day tariff pause was announced. Currently the shares are right at some resistance at

the $24.11 level. If the shares can break above this level, next resistance is at $26.62 which coincides with its recent high back in March when the tariff war escalated. It will be interesting to see if the shares can continue its upward trend. Support is at its 3 box reversal of $21.83 and, below that, $19.39. With an SMAX score of 9 out of 10

XCH.TO is showing near term strength against the asset classes.

With OPEC + intentions to begin ramping up supply next month by 411,000 B/D, and today with the US announcing progress toward a new nuclear deal with Iran potentially causing an increased supply situation, we are going to take a look at the Crude Oil Contract to see what may lie ahead for Oil.In looking at the point and figure chart of CL.F, we see the chart break a key support level of $66.86 which had previously held four times in 2023. Then a new downtrend formed where the contract ultimately found a possible floor at the $57.06 area before a new column of X’s formed this month.If the rally can continue, resistance is at $64.26 and, above that, $72.37. Support can be found at the recent low of $57.06. If the contract can’t hold this level, the next level of support is at its long term uptrend (green) line of $54.85. With a SMAX score of only 1 out of 10, CL.F is not showing much strength against the asset classes.