China is Not a Bargain Compared to the US
- Posted by Greg Harmon
- on September 26th, 2012
Pundits and Television talking heads are starting to talk about China as a value play for investments. Well back in July in China is Still Worse Than the US, and that is Not a Good Thing I noted that relative to the S&P 500 ($SPY), the Shanghai Composite ($SSEC) still had a lot of room to run lower. The updated ratio chart below shows that the nearly 4 year long descending channel was broken to the downside 2 weeks ago. And below that channel and the 76.4% Fibonacci retracement of the major move higher, there are only two spots of support left before a full retracement. The Relative Strength Index (RSI) is bearish and holding near the 30 level, technically oversold but just in a minor way. And the Moving Average Convergence Divergence indicator
(MACD) is negative, also supporting further downward movement. Maybe the valuations on the Shanghai Composite are low, or even a steal, but that does not mean that they cannot go even lower. It also does not mean that the opportunities there will outperform those in the US. This chart suggest that you keep your money at home.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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