Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

---

In April of last year, the Shanghai Composite and other key global markets were up against strong resistance lines, and the "Power of the Pattern" suggested that the impact to the world could be large if these resistance lines held. The 3-pack below, which I highlighted last month, is a snapshot of that April 2011 key resistance.

 

 

The callout in the chart below highlights the soft performance in a wide variety of assets since the China resistance lines were hit, reflecting that there were very few places to hide: Since that time the S&P 500 is flat, the Russell 2000 is down 6%, Emerging Markets, Europe and Commodities are all down between 20% and 21%.

Now the Shanghai index is breaking below another support line at (2).

 

 

Many are expecting that Ben-Claus 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 broke down was to underweight risk assets. Diversification has been poor solution to say the least over the past year, and the current breakdown would suggest more of the same.

With continued weakness in the Shanghai Composite, will the price impact be different this time due to a special gift from "Ben-Claus?" Stay tuned!

 

(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com