Just a quick follow up on the China trade (FXI) I outlined last week. In the post titled, China – Great Big Loveable Panda or Blood Thirsty Bear I noted that the etf was close to breaking critical support at $42.00. As often is the case, I have been short that trade since the post and have slowly been bled to death by the daily POMO that makes markets go one direction despite the fundamentals that suggest the price action should be the opposite.
As of this writing at 9AM Eastern, FXI is trading at $41.79 pre-market. If we open here, this should be cause for a doubling of my short position, with a target on the downside of at least $39.00 and a lower target of $36.00. Let me emphasize that you really should wait for a confirmation below $42 during regular hours to get into this trade.
China raised one year interest rates yesterday by a quarter of a point to 6.06% as they attempt to cool off their overheating economy. Please see the following Bloomberg article on the topic – http://www.bloomberg.com/news/2011-02-09/hong-kong-gauge-drops-to-lowest-this-year-as-china-raises-rates.html
(FXI)
What does this mean for other emerging countries? The serious answer is I don't know. If we look at charts like EEM, I don't see anything there that is a big tell as to direction, although it is really just floating out in space and could easily drop back to support around $43.75. I think a better target might be found in a chart like the one below EWS (Singapore), it looks like a pretty good short with an easy stop above $14.00.
(EWS)
I will have the monthly macro update done this evening. Please continue to check in at www.goatmug.blogspot.com . Until then, be careful!
