The Shanghai is down 17% from its high and...

Discussion in 'Economics' started by michaelscott, Jul 5, 2007.

  1. lwlee


    Is there a future market with good liquidity to trade the Shanghai market? I can't seem to found one with IB.
    #11     Jul 5, 2007
  2. hsi would be implied to be.. but it usually trades opposite to the chinese market... inverse correllation.
    #12     Jul 5, 2007
  3. When an index rises 300% in 2 years, -17% is totally insignifcant.
    Even if the SSE composite index pulled back to 3000, it would still be supported by its long term rising 200 day moving average.
    #13     Jul 5, 2007
  4. I am not sure that is correct to be honest I would ask Kiwi trader about the HSI/China market correlation if there is one as I know he trades the HSI.
    #14     Jul 5, 2007
  5. HSI keeps breaking new highs this week. The reason is money flow. Chinese funds can invest in HK market. Policy changes and so the historical correlation doesn't apply anymore.
    #16     Jul 5, 2007
  6. S2007S


    A 20% correction in the Shanghai market is like a 2% correction in our market. Im sure the further it drops the only stronger it will climb when it starts to rally again. Im really surprised that the other markets havent even started to decline on their market fall.
    #17     Jul 5, 2007
  7. why would you say that?
    #18     Jul 5, 2007
  8. I understand the confidence displayed by some of you in this thread for the Shanghai. However, it sounds like some have not learned their lesson from indexes, stocks and other instruments that make an unbelievable climb in very short time.

    The NDX went from 100 in 1986 to 1000 in 1998. Then the trend line changed and the index proceeded to go to 4300 within 2 years. Then the index broke the trend line and proceeded to 800 in about 2 years. Wow! 24 months and back to lows reached in 1996-1997. 3-4 years of gains wiped out in 1-2 years.

    This formation that I described is the Bump and Run Formation or BARF.

    The Shanghai stock excahange is in a similiar situation. At the top of the BARF before trend line violation, we see an overwhelming type of bullishness where everyone thinks and believes it will last forever. Jim Rogers gets on TV and says he will never sell out of China. Maids in China quitting their jobs to trade on the exchange (remember the commercials of tow truck drivers buying islands in 1999?).

    I believe the Shanghai will go much lower. It will hit 2500 first and then probably return to the 1000 level.

    Growth has never stopped a stock market from crashing when it gets in this formation. Look at the Empire State Building. It is both symbol of the roaring 20s and the Great Depression of the 30s.

    Elitetrader is a great website. You can always see people on the site bragging about their winning trades and those who prominently display their accounts up high. However, those who lost their accounts or on the other side of the trade are never heard from again.

    In the same way, lessons of hyper-inflated stock markets are easily forgotten.

    The Empire State building is my reminder that there are two possible outcomes. In time, the Freedom Tower will also be a symbol of great wealth and intense poverty. It will be started in a time when the stock market is doing well and then completed when the stock market is in a panic. In its shadow one day will be men in suits with millions of dollars and then on another day there will be the homeless and criminals roaming the Financial district.
    #19     Jul 5, 2007
  9. A quick glance at that chart shows that there is not an inverse correlation between shanghai and hong kong (run a correlation and the answer is -1 or close).

    A quick calc shows an 86.4% correlation between ssi and hsi daily.

    But don't trade hsi as a substitute. HHI would be closer if you wanted a hong kong tradable.
    #20     Jul 5, 2007