China (FXI) Breaks through the 50 Day Moving Average

After yesterday's rejected attempt, FXI pushed above the 50-day moving average with a convincing up-trend day. Volume was unimpressive though. The next test will be the 200-day moving average that coincides with the March highs.



A guppy multiple moving average chart of FXI shows the short-term moving averages are testing resistance of the long-term moving averages (these are all exponential averages), which can be thought of as a time where short-term and long-term traders collide. Notice that the 200-day EMA has basically been flat for the past six months as the index changed from a strong up-trend to a sideways trading range. This could continue for a long time, form a base for another move higher, or form a rolling top. Nobody can know for sure what will happen but one must be nimble and adjust to whatever unfolds. In the meantime, I expect a range-bound market that favors shorter time-frames, mean-reversion strategies, and all-time highs that can outperform the market because they have no overhead resistance.