Recent Comments on China Stock Market and Global Speculation
Feb 27 (Econotech FHPN)-- In its first year, my "blog" website has evolved into a format of infrequent long pieces on "big picture" themes. Because of today's events in the global financial markets, I am making an exception to this format by posting a few recent e-mails to some close friends on the markets and global situation. These are posted as written to friends, as fast as possible, there was no attempt to back up, fill out, or qualify my thoughts, as I do in my long articles, so I sincerely apologize if I have inadvertently offended anyone in my haste. (I also don't use capitalization to speed my typing). This post is an exception, I don't intend to become a frequent blogger, I'm sorry for that, but presently only hope for your valuable time for more substantive articles on critical, and I fear dire, topics when I have the chance. Thank you very much.
Sent: Thursday, February 22, 2007 2:14 AM
Subject: Shanghai A shares index up 81% since Sep 1
u.s.-centric investors/traders should be aware that this index is at the "bleeding edge" of global speculation at the present time, up 81% since sep 1, and that since the beginning of 2007, it has become much more volatile on a daily basis. the index has put in a marginal new high. i think it makes sense to monitor it very closely right now to see whether this might be the beginning of a topping pattern after having gone nearly vertical from mid-nov to mid-jan.
it closed at 3125 at the previous peak on 1/24/07. it closed at 3148 on 2/16/07, and has been closed the past days for chinese new year. this is up from an intra-day low of 2668 on 2/06, following the first sell-off since this huge leg of the uptrend began sep 1 at 1743. if it fell 36% down to 2,000, it would be where it was on 11/15/06.
china stocks have 10% daily limits, i don't know whether that could contribute to the steepness of a potential decline, as i believe has sometimes happened in u.s. futures markets when they hit daily limits on the opening during a precipitous slide.
tonight the nikkei 225 broke 18,000 for the first time in six years, as the "free money" 0.5% interest rate global speculative orgy continues.
Sent: Tuesday, February 27, 2007 12:12 AM
Subject: shanghai a shares down -9% tonight
shanghai a shares are down -9% tonight, the most in ten years. last week i sent out an e-mail noting the increased volatility and marginal new highs in china's stock market. i got no replies, perhaps it did not go out correctly, so i will repeat what i said, that this more volatile market action has made it a key time to monitor china's stock market for signs of topping for those interested, and also that since that market has been at the "bleeding edge" of global equity speculation, especially since mid-nov, its increased volatility might come to have broader implications (especially in a global financial environment extremely risk complacent at the current time). these are always long shots, but in light of the decline in shanghai a shares tonight, i would once again repeat that suggestion, not a prediction, just a heads-up for anyone interested in monitoring this.
Sent: Tuesday, February 27, 2007 2:17 AM
Subject: p.s. very scary world once again
btw, for what it's worth, if you've been following what's going on in pakistan/afghanistan with al queda/taliban lately, including cheney's trip, the world is becoming very scary very quickly once again, yet financial markets just don't seem to care.
Sent: Tuesday, February 13, 2007 1:25 PM
the attached chart is a 4-year weekly chart of the qqqq, nasdaq 100 etf. since i haven't seen the following ultra-simplistic observation in print, i want to make it here. i believe the nasdaq 100 usually tops out right around the beginning of the year, after its usual 4q fun-and-games, silly season, bonus-enhancing rally. this is shown by the first three short vertical red lines that i have drawn. you can also see it by looking at the peaks in the true strength index below the chart. if this pattern continues to hold, either a qqqq decline commences soon, as in the first two red-line tops, or the qqqq goes sideways until may, which is the other usual area for a tech top ("sell in may and go away"), as in the third red-line top. this belief in the good probability of a qqqq top is one of the reasons why i "took profits" in my paper model portfolio last wed.
... Continued at http://econotech.blogspot.com/.