Bullish Shanghai Pattern at Hand?

November 1st, 2012

by Chris Kimble

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The 18-month decline in the Shanghai index brought it down to six-year support line (1) recently (see the chart below). While at this line the index might be forming a "Bullish inverse Head & Shoulders" pattern at (2).

The global growth picture would benefit "IF" this pattern analysis is correct.

The world's markets NEED this index to push higher from here. A break of support line (1) would reflect the bullish pattern failed and send a signal of slower global growth is at hand.

China ETF (FXI) has reflected a ton of relative strength compared to the S&P 500 index over the past 6 weeks. FXI gained 14% more than the S&P 500 in 6 weeks (see post here).

From a portfolio allocation angle, avoiding FXI has been a good idea for the past couple of years, owning it once it hit the 6-year support line has been beneficial to the portfolio.

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