Emerging economies are most likely the leaders during the topping process of risky assets worldwide. The most prominent markets, China and Brazil, are already close to -20% below their early 2018 peak. We expect the topping process to persist during 2018 and eventually follow into a multimonth correction. This time lagged behavior has been typical throughout history around major degree tops and bottoms.
Meanwhile, Chinese equities are accelerating to the downside. The sharp selloff at the beginning of 2018 was followed by another couple of impulses to the downside. Both are likely at a lower degree and part of minute wave iii(circle). Market action is probably building a motive wave to the downside. It may be either an impulse as depicted in black or a leading diagonal (red).
All in all, there is plenty of room to the downside for Chinese equities during the next couple of years. Today may not be a good timing point with regard to opening a short position (it is 50/50). However, fading 3-wave rallies are probably a good opportunity for unwinding long positions or opening shorts.
Even those that do not have access to the Chinese market can incorporate the situation of the biggest emerging economy in their decision-making process. EM growth gets increasingly important for the world economy.
Meanwhile, Chinese equities are accelerating to the downside. The sharp selloff at the beginning of 2018 was followed by another couple of impulses to the downside. Both are likely at a lower degree and part of minute wave iii(circle). Market action is probably building a motive wave to the downside. It may be either an impulse as depicted in black or a leading diagonal (red).
All in all, there is plenty of room to the downside for Chinese equities during the next couple of years. Today may not be a good timing point with regard to opening a short position (it is 50/50). However, fading 3-wave rallies are probably a good opportunity for unwinding long positions or opening shorts.
Even those that do not have access to the Chinese market can incorporate the situation of the biggest emerging economy in their decision-making process. EM growth gets increasingly important for the world economy.
Trade closed: target reached:
The SSEC followed our black price path. An impulse is (almost) complete. This is most likely wave A.
Closed all shorts at mkt. close.
+8.5%
Closed all shorts at mkt. close.
+8.5%