Still Lower for China

Sabers are rattling in the form of tariffs. The US keeps upping the ante with more and more items to slap a tariff on as they come from China. And China has said they will retaliate. But can they? The US only exports about $150 billion in goods to China. I suppose they could place 300% tariffs on them.

The markets are weighing in on the battle. The US market has been hanging tough. The Russell 200 and Nasdaq 100 are essentially at all time highs. The broader S&P 500 is less than 4% from its top. But the Chinese market has been floundering and is now in a tailspin. After starting a move higher out of consolidation in April last year it peaked with the US markets in January. But then the tariff talk started.

Since the top, the Chinese Shanghai Composite ETF has dropped over 20%. This week it looks like it will close below its 200 week SMA for the first time in a year. and with the acceleration to the downside this week it looks like there is more pain before it finds support. A 61.8% retracement of the move up off of the 2016 low would bring it to the 2016 gap down level and just a little bit lower. And then there is a lot of price history down to 23. Perhaps this will hold it.

Momentum has shifted to the downside with the RSI in the bearish zone and falling while the MACE is dropping and now negative. Time will tell, but perhaps the entirety of the move since 2016 has just been a Dead Cat Bounce. For now it is continuing lower.

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