It has been quite the week for Chinese stocks as stimulus and optimism over the easing of COVID restrictions has investors and traders buying up stocks leveraged to China.  The Kraneshares China Internet ETF (KWEB) was up over 11% heading into today which was the best week for the ETF…in two weeks!  If the gains for KWEB heading into today hold up through the end of the session, the four best weeks in KWEB’s history dating back to 2013 will have all occurred this year!

In addition to having two separate weekly gains of over 10% in November, KWEB is also on pace for its third straight weekly gain of 5% or more. In the ETF’s nearly 10-year history, there has never been another streak of three weeks where the ETF has rallied 5% or more.  It’s also interesting to note that three of the ETF’s five streaks of two or more weeks in a row have all come since the ETF peaked in February 2021.

An old maxim of markets is that big upside moves usually happen in bear markets, and the action in KWEB this year is a textbook example.  Despite the ETF having its four best weeks on record this year, and two separate streaks where the ETF was up 5% or more in at least two consecutive weeks, KWEB is still down over 25% YTD and is more than 70% from its high less than two years ago. Click here to learn more about Bespoke’s premium stock market research service.

As we noted last week, this week’s sentiment data is the first to encapsulate any reaction to last week’s CPI number as well as the subsequent market rally.  Although price action has been somewhat choppy and there have been plenty of other catalysts (FTX’s collapse, more yield curve inversions, the missile strike in Poland) to balance out the inflation data and put investors back onto their heels, the latest AAII survey has shown a surge in bullish sentiment. The percentage of respondents reporting as optimistic jumped from 25.1% last week up to 33.5% this week.  That is not only the largest one-week increase since the first week of June (when bulls rose by 12.2  percentage points) but is now the highest reading on bulls since the last week of 2021.

Bearish sentiment in turn dropped sharply falling to 40.2% for a decline of 6.8 percentage points.  While an improvement, at the start of the month bearish sentiment had fallen by much more (both the last week of October and the first week of November saw double-digit week-over-week declines) and was at a much lower level of 32.9%.

The bull-bear spread has narrowed but still remains negative for the 33rd week in a row.  If the spread remains negative into next week, it will tie the record streak from 2020.

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Neutral sentiment fell for a second week in a row with the total decline in that time eclipsing 10 percentage points. At 26.3%, it is down to the lowest level since the week of October 20th, implying that investors have become a bit more decisive in their respective market views.

The AAII survey’s more bullish turn this week was also seen in other readings on sentiment like the Investors Intelligence survey and the NAAIM Exposure Index.  As a result, our sentiment composite which aggregates the findings of the three surveys into a single sentiment reading is back up to its highest reading since mid-August.  Although the reading remains negative, it is no longer at the extreme levels that were common earlier this year. Click here to learn more about Bespoke’s premium stock market research service.

Initial jobless claims were stronger than expected this week as the seasonally adjusted number came in at 222K versus expectations of a 3K increase to 228K.  Last week’s reading was revised up slightly from 225K to 226K. At the current level, claims remain off their best levels from earlier this year but in the middle of the range since those lows. Although there has not been any clear further deterioration or improvement, the level of claims remains healthy in the range of readings that were typical of the pre-pandemic period.

On a non-seasonally adjusted basis, claims typically fall during the current week of the year. In fact, since the beginning of the data series, the comparable week of the year has only seen claims rise 16% of the time.  That seasonal drop was again observed this year bringing the total count right below 200K which is below the readings of the comparable week for each year all the way back to 1969.

While initial claims are showing the labor market remains steadfast at historically healthy levels, continuing claims have been on the rise.  For the first time since the end of March, seasonally adjusted continuing claims were above 1.5 million.  Although that does not diminish just how low claims are (the reading would still need to rise another 142K to move back into the range of readings from the few years before the pandemic), they are now definitively trending higher.

With another weekly increase, it has now been five straight weeks in which continuing claims have risen. That long of a streak has been particularly uncommon in the post-financial crisis years. The only other example since 2009 was in the spring of 2020 when claims rose for 10 weeks in a row.  Prior to that, these sorts of consistent increases in claims have more precedence with 28 other streaks reaching five weeks long or more.  Additionally, we would note that the amount claims have risen (+134k) over this span is not particularly notable and is only 1.5K below the median increase in the first five weeks of each other streak.  Click here to learn more about Bespoke’s premium stock market research service.