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BEWARE THE BIG RED LEADING INDICATOR

In the past few years I’ve often noted the tendency of China’s Shanghai composite to lead the US equity market.  It led us down from 2007, bottomed before the S&P in 2008, topped in late 2009, signaled a death cross signal several months before the S&P signaled the same indicator (which subsequently sent the bears on a rampage), deteriorated noticeably in April (while US stocks were hitting their highs) and has since bottomed in July.  The index has rallied 14% off its lows and at this juncture is providing a pretty bullish indication for US stocks.

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