Bonjour Slopers ! Royal with Cheese here … I'm glad and honored to add my little contribution,or call it my "french touch", to SOH which happens to be the best place on the blogosphere !
Most of you have heard about this big country called China with its population over 1.3 Billion haven't you ? The iphone's that you carry with you,the Nike shoes that you wear come from China, the mouse you click on every five minutes like an addict in order to get to SlopeofHope also comes from China ! You guessed it, this country is more or less the ultimate factory of this god damned planet ! Without further ado let's analyse the chart of the world's biggest factory and compare it to our SPY (The Holy American Empire) !
As you can see in this chart, FXI has produced a golden cross in early May 2009,i.e (the 50 dma crosses above the 200 dma),which is a bullish pattern ! Indeed,FXI has rallied up to $47 until mid November 2009.
Surprisingly, the chart of the SPY or call it US of "A" has produced it's golden cross a little bit later, in mid June 2009. Yep, that's a a bit more than one month after China … Sweet Jesus on a biscuit, is America lagging behind China ??! Anyways,the SPY rallied up to $115 until early January 2010 !
This is where things get a little more interesting….
The actual chart of FXI shows a top at $47 in mid November with a death cross,i.e (the 50 dma crosses below the 200 dma), that is lurking ! It goes without saying that it will take a "miracle" for FXI to prevent this death cross from taking place… maybe if it rallies sharply 20% in the next couples of weeks would this bearish cross be avoided ! I'm sorry to say that,but based on my observations, this death cross is an accident that is about to happen. If you want to know the recent victim of the death cross,you can go check out the chart of the EUR/USD of the last four months if you see what I mean.
If everything goes as i expect them to, then the death cross in FXI could materialize by the end of February. Since the SPY was one month behind FXI in the golden cross,wouldn't it be "logical" to expect the death cross to take form in late March ? If you compare the actual chart of the SPY and the actual FXI.. I think that things look pretty clear to me going forward.
Conclusion: The world's larget factory is showing signs of weakness and I don't think that it bodes well for the S&P 500 . I'm out !
