China Did Not Want To Be The Grinch That Stole The Holiday Season

By: Jeb Handwerger | Mon, Dec 13, 2010
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FXI Chart

China surprised the markets this weekend. Even though inflation in running at the highest rate in two years, China is focusing on curbing liquidity rather than trying to slow down the economy aggressively through interest rate hikes. The Chinese are hesitant to raise interest rates during the holiday season before year end. The tightening move appears to be inevitable and will now be pushed off until 2011. An interest rate hike may have caused a serious correction in global markets as the consequences of QE2 and Eurozone bailouts have caused an artificial increase flow of capital into the Chinese markets. Raising interest rates right now during the Holiday Season would not be the most prudent economic decision as 2011 faces significant challenges with rapidly rising inflation in China, high unemployment and declining home values. The Chinese decided to raise reserve requirements and margin rates before instituting interest rate hikes. Confucious said, "Study the past to divine the future." In 1999, Alan Greenspan aggressively raised interest rates which caused the major decline in 2000. Instead many economists in retrospect said Greenspan should've been more aggressive with raising lending and margin rates exactly what the Chinese are attempting to do now. This is a classic strategy that has been used in the past during speculative bubbles by Central Banks. They first raise reserve requirements before instituting interest rate hikes. I believe the Chinese are very fearful of further slowdowns in Europe and the United States and runaway costs of basic commodities. They are not ready yet to raise interest rates. This may cause a bounce in the Chinese market. Look for a second test of the 50 day moving average for a possible reversal point.



Jeb Handwerger

Author: Jeb Handwerger

Jeb Handwerger

Jeb Handwerger

I started reading charts at eleven years old. One day my father, a market trader and technician found his library of books on technical analysis mysteriously disappearing. He later found the textbooks under my bed. For many years day and night I studied technical analysis and charting, working and learning from my father who has over 50 years of trading experience. Technical analysis is my passion and love.

In 2001, I started noticing the junior mining stocks and gold as having a tremendous upside. For the past 9 years I have researched many juniors and have identified the major winners using technical analysis and finding top management.

I earned a Bachelors Degree in Mathematics and a Masters Degree. I learned most of my technical analysis from the school of hard knocks, managing real money for myself and for my family.

Constantly perfecting my craft, I have traded for two decades of success in many different markets. I have been asked to post ideas to some of my students who have taken my course in charting and technical analysis. I have made an excellent living trading stocks for myself.

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