The Direction of the Shanghai Express
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A little over a year ago in The Shanghai Flag we shared that key markets in Asia were up against resistance lines, reflected in the 3-pack below.
When it comes to portfolio construction, the message of these resistance lines was to reduce risk exposure or harvest at these key resistance lines. In the year that followed these resistance lines, Emerging markets have struggled (EEM is down over 20%) and the commodities complex has as well (CRB index is also down 20%).
Now the Shanghai index is on a support line that needs to hold! If this support line fails to do so, further deflation will take place in the BRIC's, Europe, the US and the commodities complex.
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