While all eyes are on China, the Beijing Olympic Games and their seemingly superhuman heroes (Michael Phelps and Usain Bolt to name the two main demi-gods so far), not many people are noticing the Chinese Stock Market which, despite all the rosy predictions, has been in self-implosion mode since the end of 2007. The amazing thing is that you would think some kind of Olympic truce would have been observed by the sellers but no such thing happened and the selling has been fast and furious the last couple of weeks.But as one can see in the weekly chart of FXI (click to enlarge), the main Chinese Stock Market ETF, we are approaching a significant support zone and some nibbling here would make sense. FXI is now trading at 39.63, near the March 2008 low of 39.44, the August 2007 low of 36.60 and the May 2007 high of 38.85, all potential supports. The 14-week RSI is at 35.63, near its level when FXI strongly rebounded last March. Getting long here would entail putting a mental stop a bit below 35 and keeping a close eye on FXI's behavior especially right after the Games are over.
I am not by nature a bottom-picker but nurture should take precedence over nature when a well-defined profit opportunity presents itself. While no sign of a bottom has been forthcoming, I like the notion of getting long at this level in small size (making the risk of being a little early bearable) with a plan to buy more if and when strong clues to a bottom start materializing.
Stay tuned.
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