Year-to-date, U.S. markets have experienced mixed results, with major indices like the S&P 500 (SPX.I) and S&P 100 (OEX.I) down 2.88% and 4.28%, respectively, while the NASDAQ Composite (NASD.I) and Russell 2000 (RLS.I) have struggled, down 7.31% and 6.35%. The Dow Jones Industrial Average (DJI.I) is nearly flat, at -0.21%, and the New York Composite (NYSE.I) has gained 2.56%, with the AMEX Composite (AMEX.I) standing out at 10.44%. Overall, U.S. markets are lagging behind global performance. In contrast, Canadian markets have fared better, with the S&P/TSX Composite (TSX.I) rising 1.75%. The S&P/TSX Venture Composite (JX.I) surged by 6.73%, led by small and mid-cap stocks, while other Canadian indices like the S&P/TSX 60 (TX60.I) also posted modest gains.
Globally, markets have generally outperformed U.S. indices. Poland (EPOL) leads with a 36.18% surge, followed by Spain (EWP) at 23.25% and Italy (EWI) at 18.46%. Germany (FLGR) and Brazil (FLBR) also posted strong returns of 18.37% and 17.92%. In Asia, China Mainland (FLCH) and South Korea (FLKR) gained 17.45% and 10.8%, respectively, while Japan (FLJP) saw a more modest 5.73%.
Emerging markets, including South Africa (EZA) and Africa (AFK), have posted solid returns, at 14.91% and 14.93%. Other regions such as Switzerland (FLSW) and France (EWQ) have experienced healthy gains of 13.44% and 12.82%, with Mexico (FLMX), Peru (EPU), and Great Britain (FLGB) also outperforming many U.S. indices. Finally, China Hong Kong (FLHK), despite trailing with a 4.95% return, still outpaces U.S. markets. This global snapshot highlights the strength of international markets, especially in Europe, Asia, and emerging economies, as they outpace the lackluster performance of U.S. markets.
Crossroads in Relative Strength: USA vs. China (QQQ vs. CQQQ)
Point and Figure comparison charts are a key tool in relative strength analysis at SIACharts, allowing for the comparison of various asset classes, sectors, and investments to identify relative winners. By comparing the price data of one investment against another, these charts highlight trends of outperformance or underperformance using "X" and "O" markers. This method is particularly useful for long-term trend analysis, such as tracking the relative performance of U.S. Equities versus other asset classes. Given the recent moves in international market indexes, let's take a moment to review the comparison chart of the now-famous Invesco QQQ Trust (QQQ) versus the Invesco China Technology ETF (CQQQ). In the attached Point and Figure chart, scaled at 5% for long-term trend analysis, we can observe that since July 2024, when a potential top may have formed, the chart has displayed significant movement. In October 2024, a double bottom occurred—the first since late 2021—marking the first real challenge to the dominant American technology index. This pullback in the QQQ index recovered for the remainder of 2024, only to face selling pressure once again, pushing the chart into a column of "O"s as the China Technology ETF (CQQQ) took control. Today, we may find ourselves at a crossroads, with a declining formation marked by the red line and a supportive zone indicated by the green line. The two question marks (?) represent levels that could either signal a reversal in favor of China or the continuation of the same trend we've seen in recent years, with the U.S. maintaining its dominance.
Emerging Leadership: Analyzing the BMO China Equity Index ETF
The final chart presented is that of the BMO China Equity Index ETF, where units are rallying to multi-year highs. From the SIA Point and Figure chart, we can glean several technical insights. First, we observe that prices have broken through the red negative trend line, establishing the first positive trend line (green) since 2021, when unit values dropped from a high of $38 to a low of $10. As highlighted in the previous analysis, we may be witnessing a shift in leadership. Contrary to past trends, the SIA Greater China Equity Equal Weight Index is now favored, with a perfect SIA SMAX score of 10/10, indicating strong near-term relative strength against a broad basket of asset classes. The chart also features a color-coded relative strength overlay of the ZCH.TO within the BMO family of funds, which is currently positioned in the favored zone of the powerful SIA ETF report. Notably, it ranks #3, behind only the BMO Equal Weight Global Gold Index ETF and the BMO Junior Gold Index ETF.
Support on the Point and Figure chart may initially appear at the 3-box reversal level at $18.53, with further support around $17.46, which ties back to the 2016 level. Resistance may emerge near the $22.15 and $24.94 levels, which were previous support points from 2017 and 2019-2021. Additionally, the chart includes the top 25 holdings recently reported by BMO, where the majority of capital is invested in Tencent Holdings and Alibaba—both of which have been technically reviewed in past SIA Daily Stock Reports and can be found under the Asset Allocation tab. It might be worth reviewing these companies technically before considering an investment in the BMO China Equity Index ETF, given the large weighting inside the fund.
