China is red hot right now, but could a correction be in the near future?
Adam Hewison, of INO.com, and Zachery Karabel, of
Fred Alger Mgmt., share their insight.
Excerpt from show...
Burnett: “So Adam, this sounds very rational out of Zachery, but your saying we're not just talking about any old correction. We're talking about something very soon and very large...”
Hewison: “When we look at the market on a technical basis and we've been tracking the FTSE/Xinhua China 25 Index (FXI), which is the main index over there, for quite sometime and it charts beautifully. It actually is quite predictable. We're looking for a high this market, we had, actually its great to be on the show today because we hit a new high over 30,000. But we're looking for the market to possibly trade as high as 33,000 and then we're looking for a 20% correction. I'm not going to disagree with Mr. Buffet, he's one of the best investors around in the history of the world. And, he's skeptical and I'm skeptical too."
Burnett: “And your saying 20% in China means at least 10% as a result here in the U.S. Market?”
Hewison: “That's how it's worked in the past, we've seen a 20% correction In China; we've had three 20% corrections that we can track and each time it has meant a, uh, the last one was about a 10% correction in the U.S. So I'm guessing that's what's going to happen here.
Burnett: “So Adam let me ask you... I was just looking here at my screen at things that were up more than were up more than 5% today, John Deer was up, Goldman Sachs was up and then this thing FXI was the ticker which happens to be the FTSE/Xinhua China 25 Index, and that's the way you would trade this and I guess you would go short that?”
Hewison: “I wouldn't go short. I mean a 20% decline... I wouldn't want to sit through a 20% decline, no one, no investor does. But I think if you're an intermediate term trader you may want to take some chips off the table now with this FXI index, which is the best way I believe to trade the China trade.”
Burnett: “Alright so take some money off the table there.”
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