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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Chinese Stock Market Is Rolling Over

Stock-Markets / Chinese Stock Market Jan 28, 2010 - 06:02 PM GMT

By: DailyWealth

Stock-Markets

The bears are starting to win the "China argument" we told you about a few weeks ago.

To recap, the Chinese economy and stock market are the center of a big debate. Some say the country is a huge pile of malinvestment. Some say don't worry, things are fine there. Now let's ask the market who is right...


Chinese stocks enjoyed a huge rise from their November 2008 low to their August 2009 peak above 3,400. A few months later, the benchmark Shanghai Index declined to a low of 2,700. It then made a few weak attempts to get back to that peak during the winter. But exhausted buyers failed each time to push up prices.

This chart pattern is a like an aging athlete who enjoyed a great career (rising prices, A) and reached his high point (market peak, B). Then, after a stumble from greatness, made several comebacks (failed rally attempts, C and D), only to be reminded he's 40 years old instead of 26.

Granted, this is only a 10% decline from recent highs. It doesn't necessarily mean China is going to collapse. But it is fair to say the bull market in China has been dealt a severe punch to the gut... and the path of least resistance is now down.


Good investing,

Steve

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

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