I had imagined a situation in the China 25 (now 50) vs. the S&P 500 that called for China to either rise more than the US or decline less. It was based on this weekly chart and its moving average ‘up’ signal which, while still in effect has turned out to be a load of crap. You know, fair disclosure and all… got to put the bad calls up along with the good ones. So there’s a bad one for you.
By Alhambra Investment Partners
TIC For May Is Really What Is Missing About China
The latest update for TIC “flow”, for the month of May, was mostly what was expected given the “dollar pause” at that time. Central banks were still active but not nearly as engaged as they had been through the worst parts of the “dollar” crisis in late 2014 and early 2015. Official accounts (central banks and foreign governments) had turned positive in May for the first time since November, and even treasury mobilizations had dropped considerably.
This is not to say that all was decent and good about the “dollar” in May, only that it wasn’t nearly so vibrantly depressing. Given the activities in July, we may find out through TIC a few months down the road that this was the proverbial eye of the hurricane.
Continue reading China’s ‘TIC’ for May…
By Alhambra Investment Partners
The ‘Dollar’s’ Grand Masterpiece Almost In Full View
When US retail sales jumped in May on seasonal adjustments alone, economists and mainstream commentary lost all composure as they were certain that meant the “slump” was over and the dominant narrative would continue. The same occurred in Europe over a slight pickup in overall lending, not even in the household or business sectors, which was proclaimed as nothing but the beneficence of QE already working. Neither of those “certainties” lasted more than a month, as US retail sales in June were “shocking” and lending in Europe quickly fell back to its normal flatline (which the ECB has really not been able to affect through its entire five years of deep experimentation).
This is nothing new, of course, as every uptrend is extrapolated into the recovery while at the same time every bit of weakness is qualified “temporary” or “anomalous.” The result over time is the regular saw-toothed monthly variation steadily sinking on that “unexpected” but somehow persisting downtrend. If you don’t observe the overall context beyond those shortest variations you might actually expect a domestic or global recovery intact.
Continue reading Dollar’s Grand Masterpiece…
By Doug Noland
Credit Bubble Bulletin: Broken
The Shanghai Composite rallied 10% this week, enjoying the “biggest two-day rebound since 2008.” Friday saw Germany’s DAX surge 2.9%. French, Spanish and Italian equities rallied about 3%. European periphery bond yields dropped (some). The S&P500 advanced 1.2%. It was, however, another rocky week for commodities.
Global markets this week approached the edge – then recoiled, as they tend to do. Over recent years it’s become the typical pattern. Wait long enough and market stress is met with whatever desperate policy response it takes at that moment. Officials in China moved aggressively to adopt their belligerent brand of “whatever it makes” central market control. Crazy stuff. And as market participants expected, the Game of Chicken saw the Greeks and Europeans eventually cave to market pressure. Markets win again. Long live the king.
Continue reading Broken
By Elliott Wave International
Why the 32% slide in the Shanghai Composite is more than just a “hiccup”
The Shanghai Composite fell another 8% at the open on Wednesday (July 8). Trading was soon halted by the authorities. (But for a different reason that the trading halt on the NYSE the same day.)
From its all-time high on June 12, China’s main stock index is down 32%. Using the word “crash” is becoming appropriate.
“At the moment there is a mood of panic in the market and a large increase in irrational dumping of shares, causing a strain of liquidity in the stock market,” said China’s Securities Regulatory Commission on Wednesday (bold added).
But the “dumping of shares” is not the only type of selling that’s going on in China right now. Bloomberg reports that (bold added),
Continue reading China: What Deflation Looks Like
This morning we had run of the mill Mainstream Financial Media hype, with MarketWatch predictably going all Greek all the time. CNBC show’s ’em how it’s done however, layering in alongside Greece sides of Puerto Rico default talk, China stocks crashing and a Fed rate hike Jawbone.
If you know me you know that I just love this stuff. The MSM falling all over itself to a) state the obvious and b) over amplify it 100x beyond its relevance.
Ooh, a scary title.
Horseman 1: Greece is little more than a flash point. ECB is going to inflate to beat the band and as it sees fit in order to paper over any short-term fallout. Dominoes? That can be evaluated later.
Horseman 2: Using the FXT (FXI) we gauged the breakout and targeted the mini bubble well. Now we are watching key support and will evaluate whether it is at a buying opportunity at such time. No theatrics, just market management.
Horseman 3: Puerto Rico? Really? There are a lot more Puerto Rico’s (and Greece’s) lurking out there globally. But as long as global CB’s keep printing, we keep playing this game of macro Whack-a-Mole. Meanwhile this has little to do with US stocks.
Horseman 4: Dudley jawbones a rate hike. Ha ha ha…
CNBC has taken over the lead in the Dumbass Olympics from MarketWatch today.
By Elliott Wave International
What’s next for the high-flying Shanghai Composite?
With China’s main Shanghai Composite index up almost 40% this year, and the tech-heavy Shenzhen Composite index up more than 90% YTD, are Chinese stocks in a bubble?
It’s a legitimate question. You’ll find many answers out there, but this answer you won’t want to miss.
This answer comes from Elliott Wave International’s own Mark Galasiewski, the editor of EWI’s monthly Asian-Pacific Financial Forecast. Mark is on record for turning bullish on Chinese stocks almost a year ago, exactly on July 3, 2014. In that month’s issue — and at the time when almost no one was bullish on China — Mark wrote:
Continue reading China: What’s Next?
By Steve Saville
Assuming that useful price clues are what you want, it’s pointless to analyse the flow of gold into China and within China. I explained why HERE, HERE and HERE. I’ll write about the bogus ‘China gold demand’ theory again in the future as it’s one of the most persistent false beliefs within the bullish camp, but in this post I’m going to quickly deal with another China-related false belief that periodically shifts to the centre of the bullish stage: the idea that China’s government is preparing to back the Yuan with gold.
I was going to write in detail about why a gold-backed Yuan is a pipe dream, but then I discovered Geoffrey Pike’s article on the same topic and realised that doing so would be akin to reinventing the wheel. This is because the aforelinked article encapsulates the argument I would have attempted to make. You should click on the link and read the entire piece (it isn’t long), but here’s the conclusion:
“There is no way that the Chinese central planners are going to voluntarily give up an enormous amount of power by going to some form of a gold standard. It would drastically reduce their ability to spend money. It would reduce their power. It would limit their ability (or lack of) to centrally plan the economy.”
Given that there are good reasons to expect gold to resume its long-term bull market in the not-too-distant future, why do so many bullish gold analysts argue their cases using the equivalent of fairy stories?
The China short (via the leveraged YANG) is now covered (ref. May 5 post) not because I think it is not going to go up more, but because I am a chicken. I have never claimed to be anything other than a cash valuing risk manager. The heroic shorting is for others until I can get new longer-term trends. China’s trend, along with the US and others, is still up. Not talking about secular trends, but rather intermediate ones, defined here as multi-month.
In reviewing the chart of FXI, I see something similar to the European Euro hedged ETF and several other items (incl. a favored Japanese machine tool and robotics manufacturer that NFTRH subscribers know about) that may make good cases for re-buying, not shorting, eventually. There is some of this going on in US stocks as well. Think healthcare/biotech.
I don’t think the corrections are over with, but I am not ready to become a bear because I don’t see an intermediate term reason to yet. So it’s swing trading and cash defaulting for this chicken until trends change.
Back on the China 25 ETF above, it is not over sold yet but down the road, pending the view on the broad global markets, I am watching the area from which we charted the breakout in NFTRH. That would be around 42-44.
In NFTRH, using the China 25 fund FXI and the FXT index, we successfully gauged the coming of the breakout and then attained upside targets. I personally did not take advantage of it but know some subscribers who did.
What I did do, as noted in NFTRH 341, is to take the ridiculous action of leverage shorting China via YANG. That is due to the ETF/index having gotten to target in an over bought condition and starting to hesitate.
Yesterday was not very pleasant for this position. Today is better, as YANG is working its leverage to an 8% gain. This will be a quick trade in all likelihood.