I last
reported on the Shanghai comp in early August at the time arguing that the index was still consolidating and had not broke out yet. Well, 2 months later, if the current levels are held through month end, we finally have that breakout. And with the breakout, 2 major factors now come into play. First, if you look at the yield of the long bond below, it has been correlated to the moves in this index over the past few years - thus higher index equals higher yields. Second factor is also important...a rising shanghai comp should push the US markets higher as well and argue that global growth is once again accelerating. Accelerating global growth takes QE2 off the table in my opinion.
In terms of the technical support, that has not really stepped up yet. The two momentum models at the moment are showing some promise but momentum B is still really range bound. Momentum A bounced from major support around the 40% level and now looks like it is setting up a date with the 60% level. The next major hurdle comes with the price action itself - a move past 3400 argues for a sprint higher. Based on a simple range projection of the technical formation shown on the chart, 4400 would be my target.
No comments:
Post a Comment