Are Chinese stocks losing hold over U.S. markets?

In recent months, the U.S. market has largely followed Chinese equities in each new dramatic plunge. But as the Shanghai Composite tumbled more than 6 percent on Thursday, U.S. stocks ended the trading day up more than 1 percent, leading some to believe that the correlation between the two markets is becoming much less relevant.

Dennis Davitt of Harvest Volatility Advisors said the strategy of taking cues from the Chinese stock market has become riskier for U.S. investors to deploy.

"It's kind of breaking down," Dennis Davitt of Harvest Volatility Advisors said Thursday on CNBC's "Power Lunch." "It's just become less profitable to try to guess that game."

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In 2016, the Shanghai Composite has fallen 22 percent compared to the S&P 500's 4.5 percent drop. Davitt noted that the flow of funds out of the U.S. seem to be lagging behind more volatile markets such as China.

"We saw an enormous amount of sovereign wealth funds selling out of assets globally. It feels like they've stopped selling their U.S. assets and may be continuing to sell other countries' assets," he said.

The rally in crude oil and European bank stocks also helped support U.S. stocks on Thursday, said Larry McDonald, both of which have weighed heavily on markets this year. Crude oil settled up almost 3 percent, and the S&P 500 financial sector was the best-performing sector of the day.

"Those systemic issues have been relieved overnight and that is driving U.S. equities," the founder of Bear Traps Report said Thursday on "Power Lunch."

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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