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HOT TOPIC Chinese stock market

T

TheGreatBear

Guest
I heard the storm may shave off half a percentage point or more of GDP.
I don't think the storm is a bearish event.It doesn't affect fundamentals that much. All this bearishness may actually pave the way for another rally. I'm bearish because equities worldwide are sliding with no end in sight, and Chinese so far are seeming hopeful(the business newspapers are all talking about how the drop is irrational and how the bottom is near etc etc). Of course, Chinese stocks are grossly overvalued.
Where did you read that the storm has serious impacts? Please leave a link, I may have overlooked something, thanks.
 

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Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Sep 20, 2007
349
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Kansas
No link, it wasn't a news article, it was just some dialogue between speculators over on the ET message boards. They don't have anything to back it up besides their own opinion. Thanks for your feedback.
 
T

TheGreatBear

Guest
Well look at copper prices. Despite all the fears of a recession, copper prices are actually higher than they were a few months back in November when the fears began. Inventories are at lows and are declining. In fact, there is only 3 days worth of supply of copper at the LME stocks. Hard to picture a recession if copper demand is still strong.(China accounts for 30% of world copper demand, US 12% Eurozone 21%)
Zinc might be the big winner... Though zinc inventories have been building up(they are still near historical lows), most of the worries about a surplus are just that, worries and expectations. Demand still exceeds supply for periods Jan-Nov 2007. http://www.kitcometals.com/charts/zinc_historical.html We may find a decisive breakout some time. Sentiment is exceedingly bearish. At a conference of big miners and other institutions, questionnaires were given to the delegates. Not one was bullish on zinc and 55% were bearish. Zinc has fallen even more since then... No point in catching a falling knife but if we see a bottom here, the upside is huge.
 
T

TheGreatBear

Guest
Chinese stocks start trading tomorrow, after a week's holiday due to Chinese New Year festivites.
Calmer nerves of traders will prolly drive prices higher, it is also helpful that Western equities have been firming.
So another all in tomorrow. We might have seen the lows for the year.
 
T

TheGreatBear

Guest
Shanghai off by over 2% today. I got the newspaper and it says, "Strong day likely blah blah blah". Too bad it arrived too late. I didn't realize the crowd was thinking what I was thinking... Anyway I'm down 1.5% on my positions overall. Wait and see.
 
T

TheGreatBear

Guest
CPI numbers for January tomorrow.Market participants are worried, so that should explain the late day selloff(though no real need to explain anything)
I'm figuring that due to the snowstorm, CPI numbers for January will be so distorted the market won't be affected too much by it. If it's abnormally high, markets will gap down, a buy prolly. We'll have to see market reaction to news though.
 
T

TheGreatBear

Guest
CPI hit 7.1%in January, 11 year high.
And guess what? After some consolidation markets rocketed ahead to close higher over 2%.
I was right enough.Now we have ample reason to expect further increases. I see western equities are shoddy though, so that may be a pullback.
China now, is like the US during the Russian default in 1998.
EDIT: I'm still watching zinc to see if there's a big opportunity there. Zinc is still consolidating, from the fundamental numbers I've read the fundamentals don't look good(it's down 50% from highs already). But hey, market perceptions are what matter...
EDIT2: OH yeah copper ...check it out. The Investment Banks that were saying base metals might drop 20-30% just a few weeks ago now say copper is up on strong Chinese demand blah blah blah blah blah
 
T

TheGreatBear

Guest
Shanghai down 2% today on higher volume, due to weakness in US equities I think. Today US equities are showing slightly more firmness(despite CPI blah blah) so still a hold(I mean Chinese stocks.)
 
T

TheGreatBear

Guest
Down more, about 7% from post-CPI highs. Friday bounce in the US may lend it some support, I may have to whittle down positions if Shanghai breaks support, I may have misread the general conditions.
 
T

TheGreatBear

Guest
If I could take rep points off myself I'd takethem off for this trade lol, total fiasco.
Currently at support, I'll give it one more day to see if it holds or not. Ack, stupidity. Most of the market participants were bullish when I went all-in, shouldve been a red flag... so large a drop and bullish talking heads. Most of the drop has been fueled by reissuances. Which I'm a major supporter of, I think they will cool the asset bubble and prevent a future crash at even more extended levels. Of course this unsystematic risk caught me unawares(the reissuances are huge, some are trying to raise as much money as one day of volume) This reminds me of how companies were selling as many preferred shares as possible in 1907, according to Reminiscences of a Stock Operator, to raise cash knowing money would be tight to come. But these corporations are state-owned here, hardly that much incentive no?
Who knows, I'll trade this technically now. The only thing to fear is a crash below support and a snapback, that would cost some additional $ though that would probably set a good bullish tone. A trend trading friend of mine tells me the upside momentum is broken in Chinese stocks and when momentum is broken, it is hard to restore. He might be right.
 
T

TheGreatBear

Guest
Now as to copper, it is at multi-tested resistance, with inventories increasing and orders for copper being cancelled etc, so I think it will ease/fall now. Zinc has rallied strongly along with copper despite no fundamental supporting other than seasonal strong demand. So no go for these two metals for now I think. Agricultural products are on fire, so I'll abstain for now. Sugar may be an interesting watch, it looks like a bottom, though I'm waiting for like a few weeks of a consolidating trading range then buying the breakout.(so if it continues going up parabolically I'll miss out)
 

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T

TheGreatBear

Guest
Shanghai bounces off support, volume is rather light, so still not decisive yet. Copper and zinc gained strongly, presumably due to the weaker dollar. Even against news that some Chinese zinc factories that were affected by the snowstorm that have resumed production already(sorry if I'm not making much sense it is 1 am...) zinc still marked a very strong gain today. A few other technical signs show this to be a very bullish move, so probably a tentative buy.
 
T

TheGreatBear

Guest
We have a mess here now. Very weak Western equities, Japan will crash with the yen going thru the roof, and I have no idea how Shanghai will do in this environment.
Sentiment polls show investors to be neatly divided in their bullishness/bearishness. Only7% of people are strongly bullish, compared to 70% a month ago. Normally I would take this to be a bullish sign but very strong selloffs in the West could easily overflow into China.
Zinc breakout looks bullish but there's no fundamental underpinning. I'm hesitating a buy, right now the only thing fuelingthe moves upward are the crashing USD.
A mess indeed I'm unloading half my position in Chinese stocks. If they show strength, I might buy but right now the whole thing looks tricky.
Yen hitting new highs, liquidity crunch continues. What the yen carry trade giveth it shalt taketh away now.
 
T

TheGreatBear

Guest
So far, Chinese index is down about 7% from post CPI highs(where I recommended an allin)
Markets may be attempting a double bottom at former support.
It is giving me a headache, newspapers poll 10 institutions and 80% of them are bullish for next week. Couple that with the fall in US/Western equities and I feel somehow Shanghai is set for a large drop next week.
The only reasonable thing to do now is to cut down on positions and wait and see how the Shanghai market reacts. If we see strength tomorrow, and strength despite weak foreign markets, that will mean buyers are back and the strength will be something to ride upon.
Let's see, bullish factors:
Large inflow of hot money according to official statistics
Momentum of the growing economy
Strong demand for copper etc, which show strong expansion in the economy
Some important state meeting next week which market participants do not expect a crash during a meeting
Money supply still expanding rapidly(if it slows down or contracts that will be a real set up for a crash... it happens all the time... money supply growth halted to a pause in 1929, and 1987{M1 from 16% in 1986 to 5% in 1987})
7% of market participants polled are strongly bullish compared to 70% a few weeks ago
Recent drop on snowstorm and reissuances may pave the way for a rally

Bearish factors:
Tightening monetary policy unrelenting
Higher and higher inflation, CPI and PPI
Weak US/European/Japanese equities
52% of the same market participants polled say they are "fully invested"


Overall economic factors:
Bullish
Large amounts of fixed asset investment are expected to continue and to grow this year.

Bearish
Tightening monetary policy is hurting small business and the private sector that creates most of the jobs
Excess manufacturing capacity
47% of GDP is fixed asset investment, 38% is consumer spending
Inflation that appears to be getting out of control. China imports about 70% of soybeans and 50% of oil.

Equities remain highly overvalued. You have a bunch of crappy good-for-nothing GSEs selling for two or three times the valuation of Intel.


****
So with all this in mind, the only way to solve the conundum is to watch how the market reacts to all this, buy on strength and ignore the rest while keeping the fundamentals in mind.
 

Edge

Contributor
FASTLANE INSIDER
Summit Attendee
Sep 20, 2007
349
71
59
43
Kansas
Yen hitting new highs, liquidity crunch continues. What the yen carry trade giveth it shalt taketh away now.
Can't argue with that, the inverse relationship between the Yen and SPY is visible on many timeframes.

Friday's selling of US equities was on pretty weak volume. I think the question is, how much of the carry trade has already unwound. If we have a lot more unwinding to do, look out below. Having said that, I am still maintaining my bearish bias.

Anyway - I enjoy reading your commentary.
 
T

TheGreatBear

Guest
I recall there being a chart of the forward contracts of USD/JPY on http://suddendebt.blogspot.com. You can search for it. There was a sudden spike in the last few years due to the amount of about $1 trillion, which is more or less carry trade stuff and not the usual business-settlement needs. So if we can get the latest data on the current amount of forward contracts existing and compare it, we could get a pretty good idea of how much has been liquidated.
Thing is, I can't get blogspot now that my proxy has failed and the site is banned;), so I can't see the chart but I know it's there. You might want to check it out.
 
T

TheGreatBear

Guest
Market rises on huge volume. Ignore everything, BUY!!!!!!!!!!!!!!!!!
 
T

TheGreatBear

Guest
Adding a chart here. Technical analysts should love this chart. A long term bottom would mean about 100% on the upside, with very limited downside.
 
T

TheGreatBear

Guest
Crap, it fell 2% today on even higher volume.
Ugh, my traditional senses don't seem to be working, later, got a cold now.
 
T

TheGreatBear

Guest
It's hovering around support, consolidating. We'll see how it reacts towards the fall in the Western markets.
I suppose this shows we're in the late stages of the bull market, but probably one more upleg left.
 

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T

TheGreatBear

Guest
Yea right, CPI hits new highs and it falls more despite world equities bounce.
I'll post more later, this is puzzling me now.
Of course stupid me, while posting about the bleak prospects of Chinese inflation and exporting inflation I enter a position myself blindly.
Well...
 
T

TheGreatBear

Guest
Hmm, further falls.
I must be blind to ignore all the signs.
Anyway.
Well.
Um.
Unwise to hold positions any longer.
Lol, this pretty much wipes out my reputation as a prophet ;). Yes I have take some hits in capital, though commodities are a bigger problem.
 
T

TheGreatBear

Guest
Strong bounce today, we may be seeing a deadcat bounce in Chinese equities. I'm not sure...
The big ones to watch for: 1)Entries into agri commodities at support
I don't know what else, this all seems like a mess to me. Citigroup would be attractive at $10 :D...
 
T

TheGreatBear

Guest
Weak markets in China despite strong bounce in the US.
Loading up on agriculture commodities.
 
T

TheGreatBear

Guest
Chinese markets weak, soybeans up +140(10% in three days)
I think there may be a bounce to test resistance at 4000 but I'm too lazy to attempt to take advantage of it. No point, it's not a compelling entry.
 
T

TheGreatBear

Guest
I attached a chart.
Notice how I got locked into the deadcat bounce to 4700 in Feb. It is most instructive. It was largely because I was hearing talk about a bear market and I thought, "If the bear market is recognized by the media, I must be going long". Well,the indices slid further. Sliding below 4000 was a clear sell signal.
Technically, we are in a bear market now, I guess I'll just focus on my beans.
 
T

TheGreatBear

Guest
I'll post a chart of Shanghai later.
Beans retracing a bit of their gains, USDA report on 3/31 critical.
I'm not going to sell before the report, betting that we see a large gain after the report...
 
T

TheGreatBear

Guest
Charts of the two major Chinese indices. Decisive break of support though we're seeing some strong accumulation days lately. Looks like we may bounce.
The business newspaper I get is screaming bottom so... I won't buy.
This may be good for metals though. The poll at http://finance.yahoo.com has 38%of people favoring energy 37% agri and only 25% metals. I don't mean gold, I mean base metals(copper zinc and the like) Last time they held such a poll agri was the favorite and soybeans climaxed shortly.
Oil is interesting. Despite disruptions in Basra it eased and fell strongly on Friday, clearly a bearish signal. But $100 was apparently strong support as you can see from the bounce this week. Commitment of Trader shows that Commercials have liquidated a lot of shorts(Putting in perspective, two week ago Commercials were long 900K contracts, short 996K, net short nearly 100K, last week net short 70K, this week net short 53K http://futures.tradingcharts.com/cotcharts/CL). From my analysis of the last two years of COT numbers, that is at least not a bearish signal. Of course this may be due to a seasonal factor I omitted? I dunno, so no position on oil.
As to US equities... I remember a poll on finance.yahoo.com three days ago where 44% of people thought the recent up move was a headfake, far passing the neutral/bullish camp.S&P hit resistance at the 50 day MA, and is retracing on light volume. No idea what'll happen next, I don't see a compelling buy yet so...I'll pass this up.
Main thing I'm paying attention to next week will be soybeans etc. USDA numbers on Monday, should be interesting, I'm betting the
trend continues, add more to my soybean position if the uptrend is re-confirmed.
EDIT: As to gold, it appears the upward momentum has been broken for now. So neutral watching stance. It is currently at 50 day MA, but if it falls to around 825 it'd make an attractive buy.
 

Jbellefeuille

New Contributor
Sep 10, 2007
38
9
15
San Francisco
Does anyone speculate that Chine looks like Japan of the 80's before they hosted the olympic games? Some also speculate that there is much corruption in China, for example building 12-13 olympic size sports stadiums, while they have no teams to utilize them after they are built, can anyone shed some light on this? Also 08/08/2008 should be considered a very lucky day in chinese culture as the number 8 is considered to be good luck, maybe many chinese will jump into the stock market ill-informed and then crash the market when they all lose their shirt due to lack of investment knowledge? Anyone else have any speculations, why is China a better investment country then Brazil or Russia, I think it is going to burst personally so I am not making any chinese investments - does anyone else feel the same?
 

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