Chart Book
PUBLISHED : Monday, 14 July, 2014, 11:48pm
UPDATED : Tuesday, 15 July, 2014, 8:00am

Chart of the day: Sentiment shifts on Chinese shares

BIO

David is a technical strategist at Absolute Strategy Research, with a focus on sentiment, positioning and momentum analysis across global asset classes. David previously worked for 18 years at NatWest Markets / Deutsche Bank as a market strategist in their top ranked UK Strategy team, followed by a spell working for one of Europe's largest hedge Funds. David was ranked among the Top 10 for Technical Analysis in the 2011 and 2013 Reuters Extel surveys.
 

A testing week for global equities has seen sentiment measures broadly back away from excessive optimism territory, with a bout of market uncertainty most keenly felt in the euro zone also weighing on Asian shares. The sentiment barometer index (SBI) for China merits particular attention, especially when viewed in a regional context. The ASR China SBI against the Asia ex-Japan SBI dropped into excessive pessimism territory in May - a notable development given that historically over the past 10 years, an SBI reading below five has been followed by an average return of 2 per cent over the following 65 days. Since then, sentiment has begun to revive. With global equities jittery in the near term, the sentiment shift on China could make it a relatively safe play.

David McBain is a strategist at Absolute Strategy Research

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