Shanghai market

[clester]

Take a look at the $SSEC Shanghai index. Some say this index has been leading the rest of the world by a few weeks. They say its a measure of risk appetite.

Will we follow this chart? I hope not.

 

[tsptalk]

 

[taleb]

I'm not sure we can draw meaningful conclusions from the Shanghai market per se. Certainly, the crisis in the Shanghai market back in February 2007 led to the longer-term market problems (See Economic Confidence model of Martin Armstrong). Since February 2007, the correlation between drops in the Shanghai market and the U.S. market have not been 100% correlated.

On a related note, I'm new to the TSP talk forum. I noticed a pattern that I see alot in the number of comments. There were many comments from 2008 when the market plunge began but few within the past seven days. To me, this is troubling. The time to be defensive is when the market looks good, not when the market has already lost 30% of its value as in the Fall of 2008.

IMHO, the market issued two sell signals last week. As a rule, one should get out of stocks and the market when the indicies drop 1% or more on a daily basis. That is your sell signal. Otherwise, you risk corrections morphing into a Bear Market. I moved 100% out of the C Fund on Friday morning when the NASDAQ, the RUSSELL, and NDX dropped more than 1% on a closing basis.

Anyway, we as investors should take an active role in our long-term investments and learn the rudiments of market action 101 (1% true selling days, support/resistance levels, 200-day moving averages, seasonal trading cycles, symmetrical patterns in market psychology, etc.)

I've said enough. I'm out of the C Fund until the market proves to me that it can close above the August monthly high.

Cheers.

 

[taleb]

Having dismissed the Shanghai market without directly answering your question, the chart does show a Head and Shoulders pattern. This pattern of investor psychology is bearish. As a result, it suggests that a major top has been put into place. And one should anticipate lower prices ahead in the Shanghai market.

I would take my sell signals from the U.S. markets rather than the Shanghai market. That the Shanghai market has led the U.S. market down and up in the past is no guarantee of future performance.

Cheers.

 

[Bullitt]

Looks like the $SSEC recovered today from it's little dip below the 38.2% Fib Retracement Level. No doubt the eyes are still on China.

 

[Bullitt]

Possible reverse H&S pattern forming.