Chinese Curse Day

These are certainly "interesting times" for the Shanghai Composite.  This morning it fell 4.4% and closed down 5.8%, breaking through the lower trendline - now down 18% over the past two weeks and 16% for the month.  We might see an attempt at a recovery, coming back up to the trendline from below, and then if it fails to break through, "kissing it goodbye" for a continued fall.  What was support is now resistance.  

How low might it go?  Bubbles retrace to their start, so the target for the Shanghai Composite is 1000.  The parabolic rise up in the index is clear (see my prior post), and indicative of a bubble.  Over market after market we see the pattern of a parabolic rise followed by a sharp drop back to the start of the mania.  

Yves does not think we should extrapolate for a similar fall in the Dow, even with the Dow down today. He posted this chart and an analysis over at BlackSwan.  The China Bubble Redux is from "liquidity froth" not fundamentals. The Dow may hold up as it did last year even as the Shanghai Composite fell steadily downward.  

We will say later today what the leading pundits make of this.  Most likely we are in the decline we have been expecting - the week-long B wave before the Final Surge to new highs to end this bear market rally.  Whether we get to Dow10K by end of August seems problematic - I may lose my bet - but look for the US equities' correction to end between SP965-985.  It hit the upper end of that range this morning.  

We will then see over the last half of the year what this means for the Greater Recession.  A lot of calls of its end, especially based on China's Bubble Redux and how it has pulled up Australia and other commodity countries, and may have caused the Euro economies to at least show signs of life this past quarter.  I have written how China is not yet large enough to pull the world out of a recession, but it certainly can caused a stutter-step in the stats, as it may have done.  If the Chinese are hitting the limits of their ability to use fresh credit (debt) to drive their bubble, the coming fall-off of growth in the Chinese economy may also drive the fall off the W-shaped recession after a momentary positive GDP report in Q3 or Q4.  

Comments

[chuan]

Iam looking at your "Chinese Curse" more from the perspective of "Solar Eclipse Curse within 30 Calender days", so would be expecting the reversal around Aug20-21 and a severe crash....of a month

[Miguel]

TIMIONG
This scenario that you described would match with different scenario's that i saw for gold (delta turning poinnts and others)
first after the present pullback , an increase up to end of september following the last leg of the dj bear market suckers rally ,then down up to 15 november on mounting uncertainty, then, after positive 3rd quarter figures due to continuing massive liquidity of the life support actions of the governmentsi inflation scare and gold up to record by end of january and finally end of january reality knocks. China cannot pull anymore, Quantitive eeasing progams finished, money gone Governments started cost cutting programs by end of 2009. Depression .Summer 2010 gold at lows, oil at lows.Trouble.
I welcome comments on this timing

[lupani]

Yelnick, on a logarithmic chart -which i think is better for such large moves like the recent SSEC one- the bottom trendline of the recent run, has not yet been broken and it's where this index has now found support.

[Yann]

Comparing SSEC and Dow is comparing an index calculated using capital market ponderation and an index calculated using price ponderation ... This is carrot and potatoes !

[Forkoholic Serge]

Free week at Elliott Wave Forkology Club!
Just a reminder for those who signed up before August 15th.
Daily Market UPdate will be available for free til August 21st.
Login to your accounts at http://club.forkoholic.com

[Hank Wernicki]

Apples and Oranges .........

[da bear]

May you live in interesting times is a curse.
May you die in interesting times is worse.

da bear

Good luck everybody

[da bear]

i found something interesting in At The Crest of the Tidal Wave.

one of the alternate counts for Grand Supercycle 4 was if it resembled primary 4 circled in 1987.

it is Figure 5-7 on page 79 (Year 2000 Edition).

it shows an orthodox wave V top, then an (A)decline followed by a lengthy (B) wave up move that goes on to new nominal highs. followed by a sharp wave 1 (of (C)down. a quick but shallow wave II. then a devastating wave III lower that would take the DOW below the 1,000 level. maybe high volume trading is the new portfolio insurance...

also, 1929 was 22 years after the 1907 crash.
2009 will be 22 years after the 1987 crash.
Crash of '29.
Crash of 2009.

so what do you guys think? does this look like it could happen yelnick?

in At The Crest i found the 1938 low and thought that this March low resembled that one. and i was correct.

i will probably email this to EWI. if they reply i will let you all know.

da bear

Don't start the depression without me.

[yelnick]

da bear, this is pretty close to their count! But they have gotten gun-shy about where they think this is headed given the many premature calls of the top (3600, 4500, 5440, etc. on the way up). If you follow a deep wave 1 (Oct07-Mar09) with an even bigger wave 3, this has got to go low - even if it is done on a percent drop basis. End wave 2 around Dow10K, drop the same in pts = Dow2K. Drop the same in percent = Dow4K.

[Ant]

Unless of course it is a diagonal triangle - which in my view is most likely and therefore more realistic

[Bird]

If we are in fact close to rolling over...

Both the $spx and $dji are at the .382 retracement mark. The Qs, msft and other tech stocks are right at 50%. Yelnick, if there is a final push it will whipsaw these levels. Maybe we're ready to go now.

[philippine fred]

Hank,

Are you all systems go for F something sharply lower and then a retrace prior to bernake wishing he wasnt staying on

I also noticed that commodities could have begun a major slide to new lows should be confirmed by weds

PS thanks in advance, Will send you a sexy maid over...