JC has been giving a special mastermind class on Technical Analysis, and last week he invited me on to discuss momentum thrusts and crossovers. You can watch it here.
We dove into a variety of topics, covering initiation vs exhaustion, thrust clusters, and even a conversation on the difference between MACD and PPO.
One of the points I hoped to drive home in this presentation was around how to know when a momentum thrust is significant.
For me, momentum thrusts and breadth thrusts are exactly the same in this way. When they are notable, they are hard to miss. They come in spurts and clusters.
What do I mean by this?
Let’s use China as an example because I think we are witnessing a historic initiation phase right now.
A few weeks ago, Chinese stocks had their second-best day in history.
Then, they had their best week in history.
Then their best two-week run…
We’ve also seen Chinese indexes register their best 10-day performance and best rolling monthly (21-day) performance in history.
When we look at the relative trends, it’s the same story. China just had its two best weeks ever versus the MSCI Emerging Markets Index.
The Shanghai Composite vs Nikkei 225 ratio has seen its two largest up days in 30 years over the past two months. In other words, Chinese stocks haven’t outperformed Japanese stocks like this since the early 1990s.
When you hear this kind of “best ever” language, you always want to think of momentum thrusts.
A bullish thrust is a period whereby price experiences an outsized or unusual move higher. We see it all the time at the beginning of new uptrends.
And the way we know whether or not we should trust these initiation readings is because we get a lot of them when they are real.
That is the case with China right now. With every passing day, we are breaking more records.
