 
China, as represented by the exchanged-traded fund FXI, remains in a six-month downtrend. The weekly chart above shows a minor reversal. This turn places the FXI back above a 2-year trendline. All indicators on the weekly show it to be oversold, save for the RSI(2) which is approaching overbought.
The daily [[FXI]] chart shows Friday’s close to be near the top of a declining channel. Both MACD and Stochs are neutral, while RSI(2) is showing the etf to be overbought.
There has to be a trade here…
Trend followers want to get short Monday via the etf or by the inverse long [[FXP]]. If FXI continues within the channel, the next low could be beneath $110.00, which would yield over 30 points of profit.
I’m not sure it will be that easy though. I cannot remember where, but I read about possible Chinese government intervention to stop the decline of its financial markets. The Olympics are also on the horizon.
On the long side, a break above the downtrend line would put my first target at $158.00, or roughly 20 points from Friday’s close. This is an area of resistance from the 200 day average and the 38.2% Fibonacci retracement.
My gut tells me to look long here, but that is nothing but gut. Maybe some of the more advanced volatility arb and options players can suggest a market neutral trade. If not, I suggest keeping a close eye on the trendlines. Use those to know if your trade is right or wrong.
Hat Tip to Notable Calls for posting the FXI weekly. I have been closely watching the daily but had not noticed the weekly had turned at a trendline.
Hmmmmm..Asian markets down substantially….Short may be the way to start this trade off.
Nice new header, Woodshedder!
Some tarot cards or tealeaves would be a nice touch too.
I agree. I think you have to look at China as a possible long side trade, which may help the fucktarded US markets if China can find a bottom.
Juice, I sold short FXI at the open.
If it breaks above the downtrend, I’ll close my short and go long.
bearflags back to the MA all the way down