A year ago this week, the Power of the Pattern was reflecting a multi-year flag pattern was breaking down in the Shanghai index reflected in the chart below (see Shanghai flag breakdown)
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What has taken place over the past year once the flag breakdown took place? The BRIC/Emerging markets have lagged the S&P 500 by a large margin and the Commodities complex has continued to make a series of lower highs for the past year.
Below reflects the old flag pattern and how the Shanghai index is back up against falling resistance, inside of a “New Flag Pattern!”
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Over the past 8 months, the Shanghai index has been forming another Flag pattern, with strong overhead falling resistance line (1) remaining in place.
Commodities have been struggling for the past year and public sentiment in the Commodities complex has become pretty crowded as investors have grown rather bearish in the Commodities complex….I shared the chart below with Premium Members a couple of weeks ago-
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The CRB index has been down 11 of the past 12 weeks. With sentiment at these oversold levels and the last 90 days performance in the CRB being so poor, investors shouldn’t be surprised to see a bounce in Commodities for a while!
How the Shanghai index resolves the new flag will have much to say about the next several months commodities action…don’t lose sight of the Shanghai index!
