Better Late Than Never

On Tuesday we headlined that the Shanghai Composite appeared to have confirmed its rally. Weakness in our market combined with Shanghai’s correction had caused us to be cautious. But Monday we noted that Shanghai was on the verge of follow through while our market had held up remarkably well. We therefore became very aggressive off the open on Tuesday and have been well rewarded.

We get price readings from Asia in real time but volume is significantly delayed. When we received volume readings late in the day it was apparent that Shanghai had not followed through. Volume was actually lighter than the previous session.

But markets worldwide continued to act well on Wednesday and we saw no reason to be less aggressive in our stance as our markets opened. The move that day on the NASDAQ left little doubt that any feared correction was not materializing.

So it is almost a moot point that the Shanghai market followed through today. We feel it’s worth mentioning because of the power of this resumed rally. Follow through days by definition are impressive, of course. But today’s gains coincided with good news from the government about the performance of the Chinese economy. The report had been widely anticipated and the market had run hard in the days leading up to the release save only for a relatively mild and well contained decline on Thursday. A sell the news reaction would not have surprised us. Yet the market advanced 2.2% closing not far off its highs.

The index did stop just short of 3000. Traders often take profits at milestones like this. That combined with the index having moved into an area of heavy resistance might well signal consolidation next week.

But the world’s market leader is back on track and, as we predicted in our column last Friday, is leading bourses around the world to new highs.