Custom Search

Tuesday, January 6, 2009

China: Fun Bear Market Rally

The CBOE China Index is above the now rising 20 and 50 day EMAs (blue and red lines). The price is now challenging the down trendline that began in May 2008. However, the market is now overbought and I expect a 'false breakout'. It would appear that momentum will take prices up thru this resistance.

Even as the index hit new price lows at the end of Nov, the MACD did not confirm, foreshadowing this bounce. I last mentioned China in China: “The figures are horrifying.”:

“While the figures may be horrifying, the charts aren’t. The first and steepest down trendline has been broken on the CBOE China Index. Prices are above the declining 20 day EMA (blue line) and up against resistance on the declining 50 day EMA (red line). For the bounce to become something a little bigger and more interesting the pivot high of 355 needs to be successfully challenged.”

On the first sign of weakness I will be exiting my long China positions and immediately flipping short. This is nothing more than a fun Bear Market rally.

Never forget, that the conditions on the ground in the real economy continue to deteriorate rapidly.

The easiest way to trade China is via various ETFs, such as FXI.


Jason said...

Nice Post. I've been looking for weakness on the FXI for a place to get short. I'm wondering if the 150 day moving average my become resistance over the next week or so.

Anonymous said...

FXP ! FXP ! almost ready to start buying in again.....bought some more srs today. looks like we may be close to a top on this little rally...unless we go on to 50% retrace.