Shanghai Correction Achieves Initial Target
Chartworks, by Ross Clark
The Shanghai market has suffered a very poor week achieving the upper range of our targeted support. It has retraced 50% of the rally from the February low and kissed the 50-week exponential moving average. It is also within 200 points of a 50% correction (3960) of the rally from last year's low. This type of action following the parabolic run mimics the NASDAQ as of April 2000 and gold as of May 2006. We'll monitor this, one step at a time, not knowing if this was the ultimate top or where it will build a base for a new run. For now, we anticipate a wide range consolidation between 3900 and 4800 over the coming weeks. The optimum strategy during such a period would be the sale of puts or put spreads to earn time value now that option premiums have expanded.
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Author: Bob Hoye
Bob Hoye
Institutional Advisors
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