I’ve highlighted the Shanghai index many times in my commentaries, pointing out that a multi-year flag/pennant pattern was forming. On April 12th the Shanghai was at the top of this pattern and my advice was to harvest gains and lower risk exposure because key multi-year resistance was at hand (see post here). Since that time the Shanghai index is down over 20%! Any global impact during that time? here have been few places to hide! Stock markets around the world are lower, and broad based Commodities indexes (CRB/CRX) are lower too. Is theGreat Escape part 2 in play?
When it comes to portfolio construction for professional and individuals, the Shanghai index was suggesting back in April to lower risk exposure. The chart above is sending another key message for portfolio construction! If this crossroads of support DOES NOT hold for the Shanghai index, the odds of GE2 picking up speed is huge, and the message that would be sent by a breakdown would be to have risk exposure down to a minimum!
Investors might have wished they had dialed back risk exposure when the Shanghai index broke the bottom of the multi-year flag/pennant pattern back in May (see this commentary). Don’t miss this opportunity to do the same if support does not hold in the Shanghai!
(c) Kimble Charting Solutions
From The Shanghai Indicator.
Images: Flickr (licence attribution)
About The Author
My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool