The Chinese Stock Market Is Rolling Over
Stock-Markets / Chinese Stock Market Jan 28, 2010 - 06:02 PM GMTBy: DailyWealth
The bears are starting to win the "China argument" we told you about a few weeks ago.
To recap, the Chinese economy and stock market are the center of a big debate. Some say the country is a huge pile of malinvestment. Some say don't worry, things are fine there. Now let's ask the market who is right...
Chinese stocks enjoyed a huge rise from their November 2008 low to their August 2009 peak above 3,400. A few months later, the benchmark Shanghai Index declined to a low of 2,700. It then made a few weak attempts to get back to that peak during the winter. But exhausted buyers failed each time to push up prices.
This chart pattern is a like an aging athlete who enjoyed a great career (rising prices, A) and reached his high point (market peak, B). Then, after a stumble from greatness, made several comebacks (failed rally attempts, C and D), only to be reminded he's 40 years old instead of 26.
Granted, this is only a 10% decline from recent highs. It doesn't necessarily mean China is going to collapse. But it is fair to say the bull market in China has been dealt a severe punch to the gut... and the path of least resistance is now down.
Good investing,
Steve
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