For those waiting for economic reality to re-couple with North American stock prices, this update of the Shanghai composite offers promise of lower prices ahead. The chinese market tends to lead North American stocks and commodities by 4 to 6 months. We have been watching this index closely for hints as to whether global stocks may re-test the 2009 lows this down cycle. Re-testing prior lows is actually a recurring feature during secular bear markets, but figuring out the ‘when’ is always tricky. With the Shanghai still falling and now just 400 points or 20% above its liquidation low reached in November 2008, global markets clearly face further downside risks over the next couple of quarters.
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.
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