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Stocks Stealth Bull Market Correction Generating China Buying Opportunity?

News_Letter / Financial Markets 2010 Jul 25, 2010 - 11:53 AM GMT

By: NewsLetter

News_Letter The Market Oracle Newsletter
July 18th, 2010 Issue #42 Vol. 4


The Market Oracle Newsletter
July 18th, 2010            Issue #42 Vol. 4

Commodities Currencies Economics Housing Market Interest Rates Education Personal Finance Stocks / Financials Real Gems

Stocks Stealth Bull Market Correction Generating China Buying Opportunity?

Inflation Mega-Trend Ebook Direct Download Link (PDF 3.2m/b)

Dear Reader

China - You will no doubt have heard much about the start of the great chinese stocks bear market as the Shanghai SSEC index has fallen below 2,500 to currently stand at 2,424. In my opinion the whole trend off of the high is a correction and therefore represents a opportunity to buy at bargain prices.

Although whilst perma bears focus on the SSEC index, actual investor experience is better illustrated by the key China ETF FXI which shows a consolidating corrective trend rather than what one would term as a bear market.

China's wages are rising fast which means rising inflation which will be exported abroad to the west, a year from now deflationists will be using this as an excuse for still being wrong as inflation persists. Those looking for china's economy to go bust, will probably be waiting for several more decades as higher wages means more domestic consumption as the chinese consumer continues to play catch up to western consumers.

Bottom Line - China's stock market is not peering over the edge of the abyss as many commentators are suggesting, in fact i consider it at one of those March 2009-esk moments. China's Economy will more than double over the next decade which will send the SSEC several multiples higher. Watch as a year from now with SSEC trading at new bull market highs the bears will again emerge to call for another top, conveniently forgetting what was stated right at the very bottom!

More on the emerging market mega-trends for China, India and Brazil in the Inflation Mega-Trend Ebook (FREE DOWNLOAD).

Dow - An early week high of 10,407 failed to break above resistance, the subsequent down trend accelerated into Fridays close of 10,097 which is inline with last weekends analysis (11 Jul 2010 - Stock Market and Gold Summer Correction, Remember White Swans Out Number Black Swans ) that concluded towards the Dow targeting a low in the region of 9,800 to 10,000 (target low price 9875).

This weeks technical picture remains of bearish lower highs and lows which demands a pattern breaking higher high at approx 9,900 to act as a spring board for a break above resistance which now stands at 10,407. The bigger picture remains of a stock market trading within a corrective range.

The stocks bull market remains firmly in stealth mode, the perma flash crashers will emerge once again to warn of an imminent crash as a consequence of the stocks death cross just as the market turns higher.

Gold - Gold's drift lower to end the week at $1188 is Inline with last weekends quick analysis for a continuing correction that targets $1140 from $1220, which I expected to be followed by a trend to target of at least $1333 by late 2010.

U.S. Inflation - Deflationists have been ignoring CPI Inflation for most of of 2010 as being at 2% meant reality did not match the "theory". The latest data shows that U.S. CPI has dipped for 3 consecutive months triggering deflationists focus back on to U.S. CPI with cry's of DEFLATION !, Though still ignoring the fact that year on year US inflation is still at 1.1%. The trend is inline with expectations for U.S. CPI to target a rate of 1% by end of 2010 (16 Jun 2010 - The Inflation Mega-Trend Continues With UK CPI 3.4%, RPI 5.1% ).

Are Deflationists Delusional?

This is never been more evident in the manifestation of now pricing everything in terms of the Gold price so as to illustrate that everything has deflated in terms of purchasing power in Gold. Really, this is so foolish that it is unbelievable in that it IGNORES the fact that the rise in the price of gold IS a manifestation of INFLATION as DEFLATION would have resulted in a FALLING GOLD PRICE, big name deflationists have been telling you for much of the past decade that Gold CANNOT RISE because of DEFLATION, now after it has more than doubled, it is perversely being used to illustrate that DEFLATION has taken place over the past decade.

BP - BP has finally plugged the gulf oil gusher and promised to make full recompense, but U.S. Politicians are hell bent on nailing the lid on BP's coffin as the crisis extends in all directions into the political arena far removed from the Gulf with U.S. politicians now demanding British / Scottish Governments to answer what role BP played in the release of Lockerbie bombing suspect Al Megrahi last year. As ever once you start pulling hard on a thread then the whole tapestry starts to unravel towards unforeseen consequences such as the people of Britain wondering what the hell is the UK doing still fighting, dieing and losing in Afghanistan some 8 years on ?

Meanwhile where BP is concerned, the greater the anti-BP rhetoric, the greater the probability of a bid.

Comments and Source: http://www.marketoracle.co.uk/Article21199.html

Your analyst preparing to complete several strands of in-depth analysis this coming week.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

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