Last week, I posted this chart in the “Synapse Network” private forum, which flagged out as a bearish SHORT signal.
Today, the market responded with a resounding -8.5% crash in the Shanghai Stock Exchange.
Monday’s plunge was all the more surprising because it followed a government rescue package that had helped drive a 16 percent rally since July 8. That support appeared to vanish without warning, leaving analysts guessing whether authorities shifted their policy stance or just got overwhelmed by a flood of sell orders. Whatever the answer, foreign money managers didn’t stick around to find out: they sold holdings of Shanghai shares for the 13th time in 16 days.
Investors “are concerned and lost,” said Alex Wong, a Hong Kong-based asset-management director at Ample Capital Ltd., which oversees about $155 million. “China’s market is distorted, so you can’t sell short very confidently and you can’t buy up very confidently either.” – Bloomberg
Note to self: Sometimes, all it takes are a few simple tools to identify good trades and precision turning points.