This week only matter if the bags stabilized or not and it will depend on Shanghai, tonight has fallen approx. -3%, dragging the rest of Asia. Should separate the short-term vision for the evaluation to be done cold background context, to recognize objectively if it has deteriorated or not. Let’s go by parts:

:: Perspective on the short term.

In situations how are you there are only 2 types of views: those who defend “sell the tops” and those who risk to “buy the dips”. That is, the first prefer to sell on the boards, while the latter thinks there is a chance and buy on dips. But we are not day traders, even traders. At least not us. Therefore, forget about “tops” and “dips” and think that what we do in the short term (in our case, we descended recommended on Tuesday last week exposure) should help us succeed in the medium term and, above all, to defend the heritage. Succeed in the very short term would be great, but what really matters is hit in the medium term (3 months onwards). ¿Acertaremos by lowering exposure? It is early to tell. We need at least 1 month to draw conclusions … but our descent exposure should be considered, so far, only preventive and as a change of vision. Volatility (VIX) is at 26% and that should not be overlooked.

:: Context background.

This is really important because its improvement or deterioration determine the market direction in the coming months. We believe that it has deteriorated and that the bags will begin to show fatigue, so it would make sense somewhat reduce exposure and hope events to decide whether to adopt a more defensive strategy from now on or not changing anything else. On page 5 of this report offered new recommended exposure levels that anticipate the 25/8. We believe the global cycle will likely start to lose traction and the market environment deteriorates somewhat based on the following factors:

(i)  China, not only by the weight of its own economy (15% of world GDP), but by the second – round effects that have not yet come: for example, between 26% and 30% of American exports go to China or heavily influenced by China economies, competitive devaluations that have applied will rise to a currency war, etc.

(ii)  Loss of increasingly rapid emerging traction: eg, Brazil and Russia into recession.

(Iii) Foreseeable weakening of Japan, also because of China.

(Iv) abrupt Cheaper raw materials, which will be as favorable for developed economies within a few months as detrimental to developing economies, which could start having difficulty paying your debt.

(V) New political uncertainty in the euro area: elections in Greece and Spain.

(Vi) modest outlook for US corporate earnings: + 6.5% and + 5.1% 2015E 2016e. And it is not easy to identify catalysts that will counteract this, so why not reduce the sunk some risk exposure, to check the course of events? It is a simple matter of prudence.