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On 5/25/2011 the Shaghai index broke below a multi-year flag pennant pattern and the Power of the Pattern suggested the impact to the world could be very large! (see post here) The chart above reflects soft performance in a wide variety of assets, very few places to hide after the breakdown last May. Now the Shanghai index is breaking below another support line at (2).
Many are suggesting that Ben-Clause will come to the rescue, by pulling an economic gift from his magical bag. Time will tell if he is that powerful!
For now, sellers have the upper hand in the Shanghai index. The portfolio message a year ago when the Shanghai index broke down….underweight risk assets. Diversification has been challenged to say the least. With continued weakness in the Shanghai index taking place, will the price impact be different this time due to a special gift from "Ben-Clause?" Stay tuned!.