Fool’s gold. Chinese stocks.

2010-06-20-gldCharts like this inflict us with incredible ennui.  It looks like a breakout, with a gap and volume and the breakout bar is a black candle that might be interpreted as a reversal day.  Spare us the grief.  But, like Charlies Brown and the football we say, OK do it to us and we buy it.  We do this because we can always sell it if it turns out to be fool’s gold.  Which it may.  We really don’t think that a major breakout is occurring, but you have to have some consistency in your trading, and that requires us to take the signal.

2010-06-20-fxiThere may be more fool’s gold in China.  But if you believe in the idea the FXI is buyable.  What we believe is that China is as overhyped as Japan was a few decades ago.  China is not going to eat our lunch (they prefer Chinese food) nor are they a challenge to our power.  If we quit buying cheap work gloves and clay pots from them they would implode in a peasant revolution.  On the other hand if they quit buying our treasury bonds we would implode in a peasant revolution.

This is known in the trade as a folie a deux or, by some as a  destructive symbiosis.  We know it as damned if you do, damned if you don’t.

But, since all stocks are fungible and that is the only question follow where the chart leads.

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