Time for a China slowdown "story"?
It’s been some time since the markets have been spooked by a “China is slowing” story and we may be due. When that happens, commodity investors will hit a severe air pocket.
China’s equity investors are already feeling the pain. As I write this, the Shanghai Composite is down 56% from its highs set in October 2007. Technically it has gone through every Fibonacci retracement support level like a hot knife through butter. The next Fibonnaci support zone represents a further 19% from current levels.
Right now my stock level model for the Energy sector, which uses momentum and trend following factors, remains long the Energy sector vs. the S&P 500 and has been working well. It indicates to me to stay long Energy but I am a very nervous long given the macro background.