When it comes to Red Hot stock markets the Shanghai index fits the bill. Below looks at the Year-To-Date performance of the Shanghai, DAX and S&P 500 indices.
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As you can see the S&P 500 is lagging big time this year and even though the DAX is having a great year, the Shanghai is up twice as much.
What would stop this Shanghai? Could it be a key Fibonacci level? The chart below looks at the Fibonacci 61% level, based upon its 2007 weekly highs and the financial crisis lows in 2008.
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The Shanghai index this week looks to be pushing above this potential resistance level, after testing this Fib level as support.
At this time the index is about 30% below its all-time highs. Will enough investors pile into this index so it makes a run at these highs?
The run in this index from 2005 to 2007 was incredible, as it went up 4 fold in just two years. Once support broke investors flocked to the exists. The current rising channel is near as steep this time. Steep rising support was critical then and I humbly feel it will be again.
Full Disclosure…Premium Members own the pair trade, Long Shanghai (FXI) and Short the S&P 500 since the end of March
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