Nick Batsford, CEO of Tip TV, invites Zak Mir, technical analyst for ShareProphets.com, and Mike Ingram, strategist for BGC Partners to discuss China’s devaluation, plus the S&P 500 and the FTSE 100.
China Renminbi still overvalued by 15%
Ingram began by expressing his view that he expected that China would not be able to successfully rebalance its economy, and that a devaluation would have to come at some point. He commented that the Renminbi is still overvalued by 15%, and that the devaluation of 1.9% would not help China that much. Mir noted that the devaluation by China was a panic move, in his opinion, with the currency still pricing in China’s 7% growth rate, which has been dismissed to be more like 3%.
Ingram finished on China by adding the devaluation had caused a ripple effect through the rest of Asia, as well as reducing the odds of the Fed raising rates in the US in September.
S&P 500 within long term trend, whilst FTSE 100 failed to clear 200 day MA
Mir highlighted the FTSE 100 which is more bearish than the DAX, who you would expect to be affected to a greater level by the Chinese devaluation. With the numbers coming in as FTSE 100 being 73% bearish, whilst the DAX only 66% were bearish. He continued and noted that it failed to clear the 200 day moving average, and that we don’t want to see it break the July low.
On to the S&P 500, Batsford commented how it remained in its long term uptrend, with support from the rising 200 day moving exponential moving average. A downside reaction is underway today, but this is unlikely to damage the primary trend, with other the Chinese economy and a fear of a possible currency war being possible buying opportunities.