Blame it on the tools

Long-term trend still up

Finweek English Edition - - Creating wealth - COLIN ABRAMS

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.

For more rec­om­men­da­tions and charts by the au­thor on shares, stock in­dices and com­modi­ties, please go to www.the­mar­ket.co.za.

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