Two Must See Charts of the Irrationally Exuberant Chinese Stock Market
To my regular readers on this board:
I have the next two days off. I intend to take some quality time to think about some news about the Chinese markets which is being discussed on the outstanding Motley Fool message board named "Macro Economic Trends and Risks".
I am not going to write a post about China at this moment as I am now digesting some stuff which I have only recently become aware of about the Chinese banking system and their stock market.
However, the discussion on the "Macro Economic Trends and Risks" board is too good to not have some clear pictures added to the discussion about the insanity of the Shanghai exchange.
A note to all about these charts:
These charts are static Photographs of charts at the end of business for 25 May 07. They will not update. So, as a courtesy to all my readers, I will update these charts weekly now, shooting for a Friday morning look every week here in the USA. If the Shanghai market crashes, I will of course give updated photos of the market daily on this blog.
To see either chart in an easy to read size, simply click on them.
The reason for showing the charts here on this blog instead of trying to post them to the Motley Fool board directly is I have had too many people from Fool write me emails telling me my trendlines move around, or my Fibonacci lines are not showing, or my comments printed on the chart are truncated or missing. By posting charts here, I know that what I see on my end is what you should see on your end with no more distortions of trendlines, mussed up comments, missing averages, etc. By the way, I did not use a moving average on my monthly chart as I don't normally use them at all on my longterm charts.
The first chart above shows the Shanghai Exchange's trendline and monthly candlesticks from 1990 to the present. I have no idea when that exchange began its existence. I do know that stockcharts.com only gives data for many stocks and indices going back only as far as 1990. So, this exchange may have gone up more than 4200% in its existence. (Perhaps someone on Fool can research the beginning of the Shanghai exchange?)
Secondly, this monthly chart is followed by a daily chart.
The daily chart is one where I have added a 200 day moving average. (The red line). I have also added a 50 day moving average. (The blue line).
I did this because I read something in a great piece by Ty Anrdos on freebuck.com which made the following point which I will not comment on here. I only offer this as a giant red flag flapping in a hurricane wind that is picking up, and I will offer my own opinions and thoughts later . . . and maybe it would be better if all of you reading this would scoot over to the Motley Fool "Macro Economic Trends and Risk" board to lurk because I believe this is going to be as lively a discussion as there has been in quite some time . . . That said, here's the bit from Ty Andros great commenatary which pertains to this daily chart and its 200 day moving average:
“But we should point out that the Shanghai market is currently approximately 95% above its 200 day moving average. To put that in perspective, in the history of the Dow Jones Industrial Average, including wild speculative binges such as 1929, we are unable to find a market high that was more than approximately 55% above its 200 day moving average.
Perhaps the amazing upward explosion in the Nasdaq leading to the March 2000 peak comes to mind as a similar market bubble to be compared with Shanghai. That market also stopped its runaway phase right around the 55% mark above its 200 day moving average.
In our experience, these types of bubbly blow off market phases are more conducive to subsequent crashes than they are to subsequent economic booms. It is difficult to conceive that a market almost 100% above its 200 day moving average will end up in any way but a negative fashion. Only time will tell.”
No comments:
Post a Comment