Back in May the “Power of the Pattern” reflected that a key breakdown of support was taking place in a multi-year flag/pennant pattern, in the Shanghai Index. (see post here) Once this key global index broke support, stocks and commodities around the world came under pressure.
Below is an update reflecting that this key index is “attempting” to hang onto a crossroads of support…
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The breakdown of this key index in May signaled that when it came to portfolio construction, investors should reduce risk exposure stocks and Commodities. Now this index is testing a crossroads of support at (2). As the world wants to focus on Europe’s challenges, one might want to keep one eye on what the Shanghai index does at (2).
If the Shanghai can’t hold onto support…the global economy should see further stock and commodity prices declines and keeping portfolio risk exposure low will be the name of the game!