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July 16, 2007

Chinese Stock Investing Games
by Greg Silberman

Market participants will continue their stock investing games as long as the Yen remains low.

Is the entire financial world being kept afloat by the Yen Carry?
[Ok, so yeah maybe I am infatuated with the Yen.]

Subscribers are probably sick of me showing this picture but I love it:

Chart 1- Shanghai index consolidating; Yen (bottom) about to breakout

What it shows is the high profile highly speculative Shanghai Stock Index with the Japanese Yen at the bottom.

Its cheap money and liquidity which has kept the Shanghai exchange rising. As the Yen has moved relentlessly lower, the SSEC has moved persistently higher.

Now we're at the point where the yen to dollar conversion rate may be reversing higher. A move above the blue dotted line would clinch it (and offcourse have a negative effect on the Shanghai Index as well as most other markets it should be said).

So how likely is it that the Yen is about to embark on an extended trip northwards? Fairly likely based on this long chart:

Chart 2 - Japanese Yen 37-year chart

The Japanese Yen has been in a long-term bull market since the early 70s as the balance of economic power has been shifting East.

The Yen topped out in its current upwave (iii) in the mid-90s and has been mired in a 20+ year correction. According to Elliot wave analysis the bottom of this correction (marked iv) was achieved in the late 90s and would have coincided with the previous 4th wave of intermediate degree i.e. the green circle. That looks to be in place now and the Yen has been oscillating between lateral reistaince at 1 and an upward sloping trend line (red line) now currently at approximately 0.8.

In other words, the Yen is now hitting MAJOR support which according to the bigger picture should hold. Yen weakness is now a thing of the past. Unfortunately a stronger Yen does not come at a good time for Chinese stock investing games.

More commentary and stock picks follow for subscribers...

Greg Silberman CA(SA), CFA
www.goldandoilstocks.com

Profession: Research Analyst and Newsletter Editor
Company: Ritterband Investment Management LLC

Career Brief: Greg qualified as the youngest Chartered Accountant and Chartered Financial Analyst (CFA) in South Africa in 1998 at 25 years old. After completing his traineeship with Grant Thornton he moved to London where he worked for JP Morgan Chase in their Fixed Income Swaps Division. Sick of the grey skies and cold weather Greg relocated to Atlanta, Georgia where he spent the next 4 years freelancing as a management consultant. His targeted clients were fast growing mid size US based companies and he worked across many industries including credit cards, health insurance and energy trading. Greg has recently returned from Sydney Australia where he spent the last 2½ years working in Equity Derivative Structuring for Perpetual investments a major Australian Asset Management Company.

Greg has a passion for the markets and has been writing Greg's market newsletter for 2-years. A newsletter focused on metal and energy stocks and recently non-resource small caps listed in the US and Internationally.

This article is intended solely for information purposes. The opinions are those of the author only. Please conduct further research and consult your financial advisor before making any investment/trading decision. No responsibility can be accepted for losses that may result as a consequence of trading on the basis of this analysis.

Copyright © 2006-2008 Greg Silberman

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