On the weekend our technician was showing me a comparison of the last two counter-trend (up) rallies within the stock market decline year to date, and noted that the most recent rally had already retraced the same amount, suggesting the July rally may soon hit resistance. Pretty much on schedule, yesterday’s fizzle led to this mornings downturn spurred by more evidence of slowing in Chinese GDP and US manufacturing.
Chinese economist Andy Xie sees slowing growth in China as a trend which will continue in the second half, from 10.3% annualized in Q2 to 8% over the second half.
See Bloomberg clip: Andy Xie says China’s GDP could fall to 8% by year end.
Technician Charles Nenner thinks the current rally might continue into August, but then turn down sharply in the next correction leg of this ongoing secular bear.
Simply put: within a contraction phase rallies are better sold than bought or held.