Blame it on the tools
Long-term trend still up
TWO INSTRUMENTS HAVE BEEN “blamed” for causing the recent chaos in world markets.
We look at their charts. The first (in no particular order) is the Japanese yen (versus the British pound), where international concern exists over an unwinding of a very large yen “carry trade” (ie investors borrow yen cheaply to invest elsewhere). The second chart is China’s Shanghai composite index, which collapsed 9% on 27 February, triggering the worldwide slide.
While both instruments are oversold at the moment, one should expect snap-back rallies, but the probabilities favour more downside thereafter, which will spill over to world stock markets. However, the longterm trends are still clearly up and positive.
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