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

[MattF]

Quote from michaelscott:

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.

and it's the some that will never learn (law of numbers), as well as to keep the money flows going and bring others into things...those that can continue to make $$$ going up, and learn to catch things back when it retreats are the ones who continually do well.

 

[makloda]

Quote from michaelscott:
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.

With all those short positions (ES, RIMM, MA, AAPL etc.) you claim to have built up over the last couple of months, isn't it amazing you're still posting?

 

[michaelscott]

 

[synchro]

I may be wrong on this...I don't believe the Chinese markets can be shorted -- it is against the law to short stocks.

If it is true one can NOT short stocks in the Chinese markets, it'd make an interesting spectacle when all the sheep decide to sell, and there's no one left to buy or cover the shorts.

With the 10% daily limit movement rule, it is possible the market might not trade for days as every day goes limit down 10% on many stocks.

 

[yip1997]

Quote from synchro:

I may be wrong on this...I don't believe the Chinese markets can be shorted -- it is against the law to short stocks.

If it is true one can NOT short stocks in the Chinese markets, it'd make an interesting spectacle when all the sheep decide to sell, and there's no one left to buy or cover the shorts.

With the 10% daily limit movement rule, it is possible the market might not trade for days as every day goes limit down 10% on many stocks.

You are right. No retail investors are allowed to short in Chinese markets.

 

[stock_trad3r]

Quote from michaelscott:

Agree or Disagree: The Shanghai is down 17% from its high, it may tank further and this will have no effect on the Chinese economy, the world stock markets or any other economy outside of China.

I know someone from China who was just on the phone with their mother. Apparently most people had taken their savings and threw it in the market.

Many of you remember the painful lessons of 2000 and there was a huge destruction of wealth. I believe the same lessons will be learned in China and the end result will be negative.

Putz the shanghei is rebounding and will go to 8000

I

 

[S2007S]

Watch TAIWAN, Market is up over 3% in a week and 12% in less than a month, TALK ABOUT OVERBOUGHT!!!!!!!!!


These markets are out of control. Im sure Taiwan will break 10,000 and head to 15k by the end of 2007, but talk about a totally irrational market!!!!!

 

[zyadam84]

Going back to the essentials, asset prices are not how much they are worth, but how much investors perceive them to be worth. The irrational behaviour of the emerging markets say China are largely due to the domestic demand for high yield investment (the interest rate is really crap and there is lack of financial products/complete market), and partly due to the demand for Chinese equity as a global portfolio allocation.
Having said that, everything has a value, this kind of over-reaction will eventually lead to a sell off and return to value.