China's PMI increased last night and investors are giddy. I'm confused.
I've been long FXI (iShares FTSE China 25) for a little while now and the position is up 15% while the Shanghai Composite is back under 2000. I did buy FXI will the preference of seeing one more test, and possibly a break of 2000, but such are the joys of buying one instrument as an imperfect proxy for another.
Mark Galesiewski, an analyst at Elliott Wave International, recently showed a compelling chart of the Shanghai Composite tracing out a possible triangle since its 2007 highs. As much as I think China is a train wreck waiting to happen, I had to agree with his wave count.
Last week's action in the Shanghai Composite should represent the last sub-wave down and a significant bounce should occur, or else the scenario is in danger of failing. I will look for 2000 to be reclaimed by this week, and will use 35.45 as a stop of FXI if there is no rally in Shanghai.
Back in La-La-Land, our politicians fiddle on Sunday Talk Shows while nothing gets finished. Futures are up and once again I'm looking for 1425-1433 on the S&P cash index. There is even a 1:1 Fibonacci projection at 1452.39, but volume and other internals have been weak so first things first.
Below, the best immediate target would be 1385.43 which sticks out like a sore thumb.
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