China Bubble About to Burst?

China announced surprisingly good results - Q2 growth of 7.9%, well above expectations and a jump above the 6.1% growth of Q1.  China's growth expectations of 8% in Q3 and 9% in Q4 are on track for their stated goal of 8% across the year.  Sounds almost too good to be true!  In a comment to the last post, Forkoholic gave a link to this analysis of the China Bubble.  The authors use a model to explain the parabolic surge in the Shanghai index, and from that model predict the bubble will burst imminently:

Amid the current financial crisis, there has been one equity index beating all others: the Shanghai Composite. Our analysis of this main Chinese equity index shows clear signatures of a bubble build up and we go on to predict its most likely crash date: July 17-27, 2009 (20%/80% quantile confidence interval).

The data shows exports dropping 22% so far this year, but domestic consumption is up (percents are annualized):

• property up 53%
• home prices up 10%
• cars up 17%
• retail up 15%

Can China pull itself up on domestic consumption alone. with its biggest trading partner in a deep funk nea depression?  Significantly, borrowing is up 201% over the prior year.  The government's stimulus is underway.  (They clearly do stimulus better than our porkulus!)  Is this sustainable?  Well, as I noted several weeks ago, a lot of the recent rise in apparent demand may be due to other factors, such as stockpiling.  Lots of iron purchases out of Australia explain the recent rise in the AUD (beyond mere USD weakness), and yet that iron is not going into increased Chinese steel production. 

So maybe the authors are right, albeit their timing quite aggressive for calling the top: China's apparent growth is fueled by government credit, and they have become just the next bubble waiting to burst, after Internet (00), telecom (01), housing (05), equities (07), commodities/oil (08).  Watch the Shanghai Index for a harbinger of the top in the Final Surge.

Comments

[Forkoholic Serge]

A message to all members of Yorba TV

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strategies and opinions.

I will contact you all soon when we get closer to an actual "Live on
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Thanks

Michael

Visit Yorba TV at: http://yorbatv.ning.com

[ChinaSecret.org]

Hello.

I would like to put a link to your site on my blog roll if you want to do the same for mine. It would be a good way to build up both of our readerships.

thank you.

[Hank Wernicki]

The Dow Fractal Rally

http://www.elliottfractals.com/EXAMPLE_6_17_09.jpg

[barood]

990 SPX today? even the bulls yesterday switched sentiment and shorted the market. If I am right it should a be big blow off today to 990..

[M]

any common sense?

[Mamma Boom Boom]

I posted a story 2 weeks ago, on this subject:

http://www.bushongbusiness.com/webbbs/index.cgi?noframes;read=18142

[MHD]

DG.... does Neely ever have the same count as most of the other Ewavers? Most of the Ewavers have us in a final C wave up, which is making the most sense with recent market action. I would imagine Neely will only entertain this idea if 956 is taken out.

[Canadian Money]

If I'm looking at the correct index it appears that China's Bubble began to burst back in late 2007.
http://finance.yahoo.com/q/bc?t=5y&s=000001.SS&l=off&z=m&q=b&c=

[DG]

MHD,

According to Neely's rules, if we take out the June high, it is more likely that it is just an extension of his current count. For us to be in a Zigzag up and have just completed a B-wave (which I assume is what other wavers are saying, if we're about to embark on a C up), the B-wave would have had to take more time than the prior A-wave, which went from March to June.

[elskid]

How can "home prices" be a factor in China. Aren't homes only owned by a person for a max of 70 years? Doesn't the property revert back to the government after that? How can prices be a gauge of anything in a "market" like that?

[VB माँ कमीने भाड़ में जाओ]

VB
माँ कमीने भाड़ में जाओ

[Jake]

Mucho foreigners own properties in China. I do not think most Chinese can afford.

[Mamma Boom Boom]

Seems like the 'spando' may have held, yesterday, had it not been for CNBC planting that story that goosed the market.

[vascillator]

MHD,

Looking at a long-term chart, like from 1970, and looking at the rally from March, if it continues to new highs now, I don't see how that will look like a three wave move, at least not one that would make sense as the correction for the entire decline. "B" would be puny. Doesn't make sense to me. If it does that, perhaps that would represent the completion of the first leg of correction. Otherwise, we need to go sideways here and correct in time to make a triangle B or something that makes sense as being large enough.

[Mike McQuaid]

NDX charging higher with wave 3 now well underway. The March 9 reversal got the rally started until wave 2 as a running correction got labeled July 8. The continuation gap July 15 is showing a wave 3 personality. This market goes higher as it leaves old resistance at 1509 behind.

[dave]

Broadening Wedge pattern forming on the Dow and S&P

http://www.coveredcallswins.com/chartpatterns/BestBullish&BearishPatterns.html#BroadeningWedge

[dave]

Not a wave 3, the volume isnt there.

Its a Broadening Descending Wedge pattern which is bearish

http://www.coveredcallswins.com/chartpatterns/BestBullish&BearishPatterns.html#BroadeningWedge

[Mike McQuaid]

SPX 956 resistance growing increasingly vulnerable as the current rally initiates new measures for fibonacci extensions to come to aid in trading this wave 3 off the March reversal. Daily the probabilities, that SPX will follow the current NDX pattern, grows.

[dave]

Here's more on what a broadening wedge pattern looks like

http://www.traderslog.com/static/images/legacy/bull2.jpg

[dave]

Heres more on the Broadening Wedge pattern (descending variety)

http://www.traderslog.com/static/images/legacy/bull2.jpg

[dave]

*posts seem to be not sticking correctly...apologies for the duplications

[Mike McQuaid]

XLF July 8 reversal rally on track to take out two levels of resistance going back to the May high to form waves 1&2 of wave 3 off of the March trend reversal.
So three big indeses (NDX SPX XLF)are showing peer affinity to march the bull market higher.

[Mamma Boom Boom]

I'm showing significant internal deterioration. Very similar to yesterday, before the CNBC story hit.

[DG]

dave,

Mike McQuaid will be claiming this is "wave 3" until we take out the low of his "wave 2". Any rally following that will then be re-christened "wave 3". This opinion of his appears impervious to facts and logic.

[Mike McQuaid]

The spearhead of the bullish camp is the NDX new ytd high as it went past 1511 resistance and gapped up on July 15 on it's way to do it. Resistance turned support often gets tested so we'll watch that along with the gap, it's all pretty simple.

[Hank Wernicki]

This is still holding as a double top now for the SPX

7/1 10:00 am 30 minute generator Top for the SPX

IF THE SPX DOES NOT RALLY INTO THE CLOSE ABOVE 941

3:19 pm

I don't hold over the weekend so I'll leave this SPX trade up to you

As Long as f4 ( 944 ) is not taken out at the close then a double top ( fractal is confirmed )

And 2 fractal instances .. good odds

A pullback for Monday would be expected for lower prices.

I hope everyone at least bought one of the call options for the stocks mentioned this week

Enjoy the weekend ..... Out and Flat .. should sleep well :-)

Hank

[Forkoholic Serge]

Agent Brown: SPX, She got out.
Agent Smith: Doesn't matter.
Agent Brown: The pop is real.
Agent Smith: Yes.
Agent Jones: We have the number for their next target.
Agent Brown: The number is 1000.
Agent Smith: We'll need a Fibo projection running.
Agent Jones: It has already begun.

http://www.forkoholic.com/images/spx1000target.jpg

[Mike McQuaid]

$TRAN, transports, March low reversal to the early May high into a contracting triangle that resolved into a thrust on volume off the July 8 long-legged doji. It's a classic bull flag pattern whose next chart feature is to top June resistance. So the transports are in league with the industrials to give the chartist the Dow Theory bull market. Contact me at [email protected].

[Mamma Boom Boom]

Make sure your speakers are on, then check out this pizza order:
http://www.aclu.org/pizza/images/screen.swf

[Upstart]

Trannies look to be in wave D of triangle. Triangle not over yet. Other indexes in wave B of triangles, some running, some not.

[Forkoholic Serge]

Tell Prechter Recession has ended, people!
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=4226712&cl=14570683&src=news

It says right there! on a bus!
http://news.yahoo.com/nphotos/Interstate-95-Rhode-Island/photo//090716/480/b90179da4b08406594fed26467f4a93c//s:/ap/20090716/ap_on_re_us/us_recession_billboards

[KT]

Perhaps you should change information sources from yahoo to financial times, bloomberg, or wall street journal?

[george]

arch crawford see the largest t sqaure he has ever seen to occur in his lifetime next year. His outlook for 2010 is very grim: the alignment of the planets around July 27-30, 2010, could see ‘major changes on the earth, it could change the face of civilization’
he plans on reentering short positions september 2009.

[Forkoholic Serge]

>Perhaps you should change information sources from yahoo to financial times, bloomberg, or wall street journal?

my shoeshine boy stock picker does an excelent job ;-)

[NH]

>he plans on reentering short positions september 2009.

Will it be that obvious this year?

[barood]

will Neely change his forecast or count if SPX passes 10,000. I remember I read that somewhere and if I remember correctly it is based on rules of logic. Looks like SPX to 990 is becoming more probable now based on Gold and oil activity tonight. Gold and oil tend to make extended moves toward the end of uplegs. Barood

[Forkoholic Serge]

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[Supermoon July 22]

Watch this weeks Earthquake Window around the July 22 Perigean Eclipse.

http://www.astropro.com/horoscop/2009/charts/0722.GIF

This eclipse is called a Supermoon because it is at Perigee. Earthquakes, tornados, heavy precipitation can occur on these Supermoons. Watch this week for big earthquake possibility.