China - Market Direction 01 (May 12 - Jul 15)

[winston]

UGLY PRICE ACTION IN CHINA by Brian Hunt

An update on the China debate: the bears made their case stronger this week.

Regular readers know how China is the center of a great financial debate. Some world-class analysts, including Jim Chanos, say the country is a powder keg of government malinvestment… which will cause a huge economic slowdown.

On the other hand, you have many "China bulls," who say the bearish arguments are overblown and overhyped. Since China is a key cog in the global financial engine, what happens here is extraordinarily important to your investments.

We often check in on this debate with the "Dow Industrials of China," the Shanghai Composite Index. This index tracks the biggest, most important companies in China.

As you can see from the chart below, Chinese stocks have been hammered since 2010. Early this year, the Shanghai Composite established a bottom at 2,148. It then tried to rally, only to fail.

And just in the past week, the index barely broke below the recent low (to close at 2,147.96). In other words, things continue to get worse for China… and better for the China bears.


Source: www.dailywealth.com

[winston]

Shanghai Downtrend Strong, Could Test 2,000: Chart

The Shanghai Composite Index broke a key support level to open at 2,132 on Tuesday, its lowest level this year.

And the key question is whether the index has the ability to successfully test support near 2,140, which was created in December 2011 and January 2012.

This is a critical level. Failure of support at 2,140 confirms the continuing strength of the downtrend and sets a new downside target near 2,000.

http://www.cnbc.com/id/48295135

[winston]

"The market is entirely focused on macroeconomic fundamentals and the fact that there has been no clear, overarching stimulus policy from the government," says Wu Dazhong, an analyst with Shenyin Wanguo Securities;

"The Shanghai index may continue in this weak state for at least one or two months," he adds.

Property stocks are lower on expectations that a government investigation of property markets in 12 provinces may lead to further tightening measures.


Source: Dow Jones Newswire

[winston]

A Big Breakout Every Trader Should Note By Amber Lee Mason and Brian Hunt, DailyWealth Trader

The bears just scored a major win in "the great China debate"…

As we explained earlier this month, China is at the center of a huge argument between some big-name investors…

On the one hand, you have the bears – like master short-seller Jim Chanos and top hedge-fund manager Hugh Hendry – who say the country is a powder keg of government-directed malinvestment. These investors are predicting a "hard landing," where China's legendary growth slows sharply.

On the other, you have the optimists – like popular investor Jim Rogers. He and other China bulls say these fears are overhyped and overblown.

Traders have plenty at stake on the outcome. China is the world's "workshop"… and its largest consumer of commodities. If China has a big problem, the whole global asset market has a problem.

We've been monitoring just how big the problem might be with the Shanghai Composite Index. It tracks the biggest and most important public companies in China. You can think of it as the "Dow Industrials of China."

As you can see, the Shanghai Index suffered a big decline in late 2011. The index fell from a high of over 3,000 to a low of 2,148. Early this year, it attempted to rally off those lows. But this rally has failed.

On Monday, the Shanghai Index hit its lowest low in three years.

The big trend in the Shanghai has been down since late 2009. Earlier this year, it looked like that trend might reverse and prove China bulls right. But this latest "breakout" to the downside is a point in the bears' favor.

While this isn't a guarantee that the slowdown is turning into the much-predicted "hard landing," it's a good sign that things are getting worse over there. And it's one of the biggest things traders need to keep in mind right now.


Source: www.growthstockwire.com

[winston]

Most important global support test in almost 20 years? Is it really all about Europe? by Chris Kimble

The Shanghai index is testing a support line that has been in place for almost 20-years at (2) in the above chart.

Much of the media focus tends to be focused on Europe these days.

Even though the world would like to see Europe solve its challenges, how the Shanghai index handles this support line could be just as important.

The world is hoping the Shanghai holds onto this support line!

http://blog.kimblechartingsolutions.com ... ut-europe/

[winston]

A shares poised to be propped up by Grace Cao

China is prepared to invest 100 billion yuan (HK$121.7 billion) to boost confidence in domestic stocks should the Shanghai benchmark dip below 2,000 points, fund managers quote mainland officials as saying.

"If the Shanghai Composite Index falls below 2,000 points, we will consider saving the market by injecting 100 billion yuan," an official told a public and private sector gathering.

Participants included representatives from the China Securities Regulatory Commission, People's Bank of China and fund houses.

Three such meetings were held last week.

The Shanghai index slipped 0.3 percent to 2,103.63 at the close on July 31, creating a new trough since March 2009 as concerns over further economic slowdown in China exacerbated.

The index rebounded to 2,132.8 last Friday on hopes of state backing for equity markets.

An official from the China Banking Regulatory Commission said the regulator is working on rules covering irregular fee management at banks which it hopes to execute next year.

"As a service industry, banks should remember their ethics. They cannot rob clients," Huang Yi, director of the commission's supervisory rules and regulations department, said yesterday.

PBoC said it would continue fine-tuning its monetary policy during the second half and would never allow a systematic crisis to occur.

New loans by mainland banks in July are expected to remain stagnant, impacted by slowing lending by smaller banks.

http://www.thestandard.com.hk/news_deta ... 20806&fc=1

[winston]

CHINA BULLS: THE ODDS MAY BE SHIFTING IN YOUR FAVOR by Jeff Clark

We've been bearish on China's stock market for what seems like forever. But it may be time to start getting bullish…

A great way to keep tabs on the "China situation" is by monitoring the "Dow Industrials of China," the Shanghai Composite Index. This index tracks the biggest, most important companies in China.

Over the past few years, Chinese stocks have been getting hammered. The Shanghai Index is down 33% from its 2009 peak, and almost 20% from its 2012 watermark high near 2,500.

But the index broke out to the upside of a bullish "falling-wedge pattern" last week, and it's in the process of testing the former resistance line of that pattern right now.

If the line holds as support and the Shanghai Index bounces from current levels, we may be on the verge of an important, long-term reversal for the Chinese stock market.


Source: Daily Wealth

[winston]

The Chart That Keeps Us Up At Night

The only major global equity index which we monitor — and it is a big one – that is down for the year is the Shanghai Composite.

The chart looks ugly and ready to break to new lows after its post crash peak of 3,477, way back in August 2009.

What does the continued poor performance of the Shanghai signal? Not sure, but either Chinese stocks are holding a massive fire sale and the Shanghai is setting up for a huge bounce or Air China is crash landing. And the latter, folks, ain’t good.

Another 2o percent drop in the Shanghai from current levels and it will be testing the lows of the 2008 crash. Keep this one one your radar.

http://macromon.wordpress.com/2012/08/1 ... -at-night/

[winston]

DJ MARKET TALK: Macquarie Cuts Chinese Equities To Neutral

1432 [Dow Jones] Macquarie says it's been recommending an overweight stance on Chinese equities , within a regional Asian portfolio premised on a belief that the slowdown would be contained by government stimuli.

It says although a stabilization was seen across PMIs, bank lending, money supply and inflation, indications are that this phase is being replaced by renewed weakness.

The house says the risk-reward of being overweight China has turned less appealing, with the deteriorating outlook for financials.

"While we think a lot of bad news is already in the price, a sustained upswing would require substantial clarity and improvement to the outlook for banks.

We don't expect that for some time. We downgrade to Neutral."


Source: Dow Jones & Company, Inc.

[winston]

New plan to boost markets

China launched a pilot program Thursday allowing selected brokerages to borrow money via an intermediate securities finance company and re-lend to clients for margin trading, a move that could inject billions of yuan into the nation's sluggish stock markets.

Source: Sina