The Emini closed up 1.75 points at 1,419.50 on Monday. The market continues to bounce between 1,410 and 1,424 on above average volume over the last 2 days. My four trend oscillators are almost all over-bought but yet to turn down.
The chart above shows my version of the Smart Money Index, labeled ‘Secret 3’. As you can see it caught the last upswing nicely, turning before the Emini bottomed. It has now reached a level of +222, the highest level since April 2003. However, despite being over bought it is yet to turn down.
The chart above is a little out of my usual commentary but I thought might be of interest. It shows the Shanghai Stock Exchange Index over the last 3 to 4 months. Two weeks ago we had the Chinese market collapse with a 9% downward move. Since then the market has retraced two thirds of this loss, all in the space of 5 days!
Trend moves followed by retracements like this are often symmetrical. We could see another downward leg of similar magnitude to the original 9% move, which would take the Shanghai market to below 2,700. This continuation move would no doubt have an impact on the Emini and maybe see us retest the 1,380 level.