China's 3Q & 4Q GDP impact on commodities and global markets

Discussion in 'Trading' started by aradiel, Aug 16, 2008.

  1. aradiel


    Considering the fact that I work in brazilian markets, the right adjustment in expectations regarding the commodities sector is a key factor for me: is the sell-off of the last couple months just a correction or are we about to face something bigger?

    With this question in mind, I took a look at the FXI chart - being China one of the major buyers of those goods - and what I saw could be described as a bearish pattern.


    The forecasts numbers on China's 3Q GDP are sitting around a healthy 10,2%. I wonder what would be the impact of a negative surprise on this data over global markets: probably enormous. Also, are some markets (e.g., FXI, commodities) already anticipating it?

    As of now, I think it is prudent to get out after a big bounce (if you haven't yet) and wait for the definition in the sidelines - especially if you are trading commodity-related stocks - and then trade accordingly.

    Of course, I would like to have some opinions on this subject. Let's discuss.

    China think tank forecasts GDP growth at 10.2% in Q3
    + - 14:34, August 08, 2008

    China will record a GDP growth of 10.2 percent in the third quarter, roughly the same as the second-quarter level, according to a report released on Friday by the State Information Center, a government think tank.

    The report predicted the consumer price index (CPI), a barometer of inflation, would rise by 6.6 percent for the third quarter.

    Prices of agricultural products would continue to fall, which would contribute to the stabilization of the CPI.

    Some observers believed that the pressure from the rising producer price index (PPI), which gauge ex-factory prices and influences CPI, might be a concern, but even taking into consideration its impact, consumer inflation might no longer exceed the February peak (a 12-year-high of 8.7 percent) in the coming months and the first half of next year.

    The report said reconstruction in disaster affected areas would add to demand for investment, and spending on energy efficiency would become a new focal point.

    It predicted fixed-asset investment nationwide would reach 4.77trillion yuan (695.1 billion U.S. dollars) in the third quarter, agrowth of 27.6 percent over the same period last year. The growth rate would be 1.3 percentage points higher than the first half.

    The report said consumption would continue to be a major driving force for the national economy. However, auto and home purchases ebbed notably in the first half, adversely affecting consumption in the third quarter.

    It forecast retail sales at 2.61 trillion yuan nationwide in the third quarter, up 20 percent. The growth rate would be 1.4 percentage points lower than the first-half level.

    Over the first six months, China's GDP growth was 10.4 percent and CPI rise was 7.9 percent.


  2. Care to explain why it is that you feel the above chart is described as a "bearish" pattern?

    It looks like a very normal and orderly consolidation that is quite typical after a big rally phase.
  3. aradiel


    In terms of price action purely, the area around 40 is being consecutively tested, while each bull reaction achieves a lower high. It suggests that buyers are getting weaker as the time passes and the defense of the psychological level of 40 is about to be broken. This price pattern is often described as a descending triangle, and can be spotted very crearily in the weekly chart of the S&P Bank Index:


    The triangle figure in the FIX chart may disapear in the comming weeks (or be retraced), but the interpretation that I have is that the more times the support line is tested, the bigger is the downside once it is broken, specially when we are talking about weekly movements.

    Of course, if you don't believe in price action this is all BS (nevermind the indicators on the chart, I am not a big fan of them since their subjectiveness often spoil the strategy).
  4. aradiel


  5. nice moves, aradiel.
  6. Doji7


    Good one Aradiel !!

    What do you think about Real

    I think Bovespa 40.000 is the cross roads