Monday, May 14, 2007
The Shanghai market has reached its price objective on the point and figure charts. So a couple of outcomes are possible. It could crash. This seems to be the popular opinion. However it could also trade sideways for an extended time. This is a scenario that no one seems to be considering. As you can see in the second chart after the devastating bear market ended in 1932 the Dow took off for a 300% gain. So the Chinese markets rise isn’t all that atypical following a severe bear market. Granted the Chinese market didn’t lose 89% of its value like the Dow did in the 1929 crash but it did lose 55%. That’s a pretty severe bear market by any measure. At the time the US was poised to start its run to become the economic superpower of the world. I think China is sitting in the same position as the US was coming out of the great depression. Will they have setbacks? Of course they will but I think in the long term China is just beginning.