Just read a couple of articles in the Wall Street Journal this morning about accounting issues in China. This jives with things I have been hearing from others about problems and concerns in China. Those who know us realize that while all of this is interesting we don’t base investment decisions on conjecture and prediction, only based on what the market is telling us. We don’t have any direct exposure to China except for a small amount in two strategies because the market has shown that China is not the place to be. We do a lot of work with trends and momentum/relative strength so I took a look at the iShares China 25 Index Fund (FXI) vs. its 200 day moving average and vs. the S&P 500. From a trend following standpoint the FXI is below its 200 day moving average and from a momentum/relative strength standpoint it has been trounced by the S&P 500 since late last year. Now remember, we do not make recommendations on this blog so I am not saying sell China if you own it or don’t buy it if you are considering it. All I am saying is that you should seriously consider a methodology that puts you in harmony with the market trends vs. a methodology that comes up with a specific asset allocation and holds it through thick and thin.