Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

China Stocks Bear Market Crash, Are We Near the Bottom Yet?

Stock-Markets / Chinese Stock Market Aug 27, 2015 - 02:05 AM GMT

By: Nadeem_Walayat

Stock-Markets

China's stock market meltdown that began Mid June from a SSEC trading high of 5,200 had paused under the weight of heavy the Chinese government interventions that in total amount to over $400 billion thrown at the stock market in an attempt to bring the selling to a halt. However, all of that literally went up in smoke along with one of China's largest ports which literally exploded revealing behind the truth of what the Chinese economy is, a mere mirage of the picture of strength and stability that communist party propaganda has been successfully propagating.


In fact the Onion did a good humorous job of catching the reality of China:

Shoddy Chinese-Made Stock Market Collapses

SHANGHAI—Proving to be just as flimsy and precarious as many observers had previously warned, the Chinese-made Shanghai Composite index completely collapsed Monday, sources confirmed. “Sure, it looked fine from the outside, but anybody who saw it up close knew that it was of such poor quality that it wasn’t built to last,” said Allen Sigman of the London School of Economics, adding that the stock market, which he described as a crude knockoff of Western versions, was practically slapped together overnight and featured countless obvious structural weak points. “They pretty much ignored regulations, and inspections were a joke. The only surprise is that it didn’t fall apart sooner.” Sigman added that he just hopes there weren’t too many people who were hurt in the disaster.

To date the chinese emperor has shown himself to have no clothes, as the decline once more resumed taking the SSEC index to a new bear market closing low of 2927 despite a panic interest rate cut and relaxation of bank reserve ratios and some $400 billion thrown at the stock market to date, and not forgetting the currency devaluations which apparently rather than supporting the stock market looks like having sparked the current wave lower. Though China does still have huge reserves of an estimated $3.5 trillion, so if it chose to (which looks likely) then the Chinese government could easily throw another $400 billion dollars at the stock market.

China Stock Market Long-term Outlook

The fundamental flaws at the heart of China that act as a cap on how far China could economically progress towards rivaling the West is that its economy and people exist within a totalitarian system that lacks key requirements necessary to replicate the level of development of the West, namely freedom of thought and expression where instead China's communist system demands obedience and conformity without protest from its people and tends to crack down hard on all who fail to conform to its rigid system of absolute control.

The China economic development cap is nothing new for I have warned of it for well over 5 years now as illustrated by my January 2010 Inflation Mega-trend ebook (FREE DOWNLOAD). That warned that in all probability China would hit an economic brick wall at approx 50% of typical western GDP per capita as excerpted below:

The Inflation Mega-trend Ebook - Jan 2010 (FREE DOWNLOAD).

The Chinese fast growing economy with consistent annual growth rates of 10% per annum is on course towards becoming the worlds dominant economy over the next 10 - 15 years, with GDP per capita at just $6,000, China's economy retains the capacity to keep doubling in size several more times before growth rates seriously start to diminish, therefore despite the growth to date the economy still has a long way to go towards even reaching half the per capita income of that of the western economies.

China Intellectual Growth Problems
One possible fly in the ointment is future political stability, as so far the 'communist' in all but name one party state in China has been able to keep its peoples eyes focused on economic prosperity and not to stray into political activism, whether at some point in time a crunch point comes when a more wealthy educated people demand more openness and freedom of expression.

Another problem that follows on from the authoritarian government structure is that China's access to the information age is very limited, i.e. web searches are usually blocked and user access to the internet closely monitored. This implies that China is unlikely to replicate the global growth in the production of consumer durable goods on to the internet technologies, which will still largely remain something in the hands of the democratic relatively free English speaking world as long as they do not erode their own countries freedoms by means of the states misapplication of technology to prevent free thought.

Back at the start of 2010 Chinese GDP per capita was just $6k, 15% of the likes of the UK on $39k per capita. So despite communist party corruption and incompetence China still had plenty of years of growth ahead of it. Whilst today China's GDP per capita has risen to $10.5k, 26% of the UK's $41k. Which suggests that on face value China's economy is only about half way there, which means whilst China's economy is slowing today. However the slowdown will be temporary as the Chinese economy looks set to double in size once more before it hits a systemic brick wall when the real economic and social fire works will begin.

Again it should not be forgotten that the primary reason why the people of China put up with being slaves to the communist system is because of strong economic growth that delivers prosperity. Hence why the Chinese government is bending over backwards to support the stock market and economy for if they fail then so will the Chinese communist party system, thus potentially sparking a violent revolution, which is why what China does in terms of stimulus can be several orders of magnitude greater than which Western nations would entertain. In fact I would conclude that the Chinese communist party is permanently in a state of paranoia about a revolution that would spark from the economy in trouble i.e. rising unemployment / falling real wages.

Therefore this implies that today's China stock market sell off is a long-term buying opportunity. Where by a decade from now the SSEC should have traded in that time at TRIPLE its last close of 2927. So despite short-term pain on a long-term basis the China story is far from over! The alternative is that this is the start of the end of the Chinese Communist party (low probability).

China Stock Market Bottom?

In terms of my current expectations for the Chinese stock market then I refer to my in-depth analysis of mid July that as of SSEC 3877 forecast a resumption of the bear market to a target spike low of SSEC 2,500:

13 Jul 2015 - China Crash, Greece Collapse, Harbingers of Stock Market Apocalypse Forecast 2015?

China Stock Market Forecast Conclusion

Pulling all of the threads together implies that the current rally is corrective, following which the SSEC bear market looks set to resume with a vengeance with the SSEC targeting 2,500! Which is quite some distance from its last close of 3877.

As for what happens after SSEC 2,500 is less clear, I am leaning towards probability favouring a dip to 2,500 being a panic spike that soon reverses higher and resolves to base building between 3,000 and 3,500 for the remainder of 2015. However, if the spike low rally fails then that could yet trigger FURTHER panic that plunges the SSEC into a deeper trading range of 2,000 to 2,500 for several years.

So the bottom line is that there is far worse to come for China investors. In fact the china bear markets only about half done!

Since when the SSEC has fallen by nearly 1000 points or 25% and is now within touching distance of the target low from which the SSEC could carve out a bottom. Recent trading volatility suggests that when the low comes its going to be pretty quick (as originally forecast) i.e. the final spike low could occur over just 1 or 2 trading days rather than a laboured bottom forming process, with the SSEC likely quickly rallying to back over 3,000 (+20%) and unlikely to revisit the SSEC final low again.

The immediate technical picture of a deeply oversold, down 23% in just 5 day, and the elliott wave (A-B-C) pattern implying an imminent bounce before the SSEC final spike low. So the SSEC should trade higher over the next few days before likely spiking lower once more.

The bottom line is that the China stock market IS NEAR a bottom, and that it could even all be done and dusted within a week or so!

For what China means for western stock markets such as the Dow then ensure you are subscribed to my always free newsletter for my next in-depth analysis due to be completed this week that will seek to update my existing long standing trend forecast for 2015 as excerpted below.

In the meantime check out Robert Prechter's view on the Pandemonium in the Stock Market in his timely FREE Report.

Existing Forecast

03 Feb 2015 - Dow Stock Market Trend Forecast 2015 by Nadeem Walayat

The Dow resolves to a bullish Elliott Wave pattern i.e. implies that the Dow should now embark on a trend to a new all time high, probably before the end of March! So contrary to much of the building picture so far. Thereafter suggests a summer ABC correction back down to around 17,500 to coincide with "Sell in May and Go Away".

Dow Stock Market Forecast 2015 Conclusion

My final conclusion is for the Dow to spend the first half of 2015 in a wide volatile trading range as it continues to unwind the 2014 bull run and sets the scene for the next series of bull runs to new all time highs. I expect the Dow to have started its bull run by early August off of an summer low and then continue into the end of the year, punctuated by an October correction low. I further expect the Dow to be trading well above 19,000 during December 2015 and probably above 19,500, before closing at around Dow 19,150 for a 7.5% gain for the year as illustrated by the following trend forecast graph for 2015.

Dow Stock Market Trend Forecast 2015

The bottom line is don't be frightened by first half weakness, yes it may look grim if we see the Dow trading under 16k, but all it would represent is a deeper buying opportunity before the market resolves to above Dow 19k.

Ensure you are subscribed to my always free newsletter for my next in-depth analysis and concluding detailed trend forecasts that include the following planned newsletters -

  • Stocks Bull Market Over?
  • US Dollar Trend Forecast Update 2015
  • Crude Oil Price Trend Forecast
  • Islam 3.0

Also subscribe to our Youtube channel for notification of video releases and for our new series on the 'The Illusion of Democracy and Freedom', that seeks to answer questions such as 'Did God Create the Universe?' and how to 'Attain Freedom' as well as a stream of mega long term 'Future Trend Forecasts'.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2015 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules