China Now Officially in Bear Mode

China's raging bull market that saw the Shanghai Composite rise 502% from 7/11/05 to 10/16/07 has officially ended when using the standard 20% threshold. The index is now down 20.1% from its closing high reached on the 16th.

We went back and looked at historical bull and bear markets of the Shanghai Composite and found that the average bear market lasts 151 days with a median decline of 30.59%.

click to enlarge

* A bull market is a 20% rise that was preceded by a 20% decline. A bear market is a 20% decline that was preceded by a 20% rise.

Comments

[madtader]

For emerging markets like China, 20% correction isn't a real bear, double that, say 40%, then we will talk.

[huangthomas]

This is a Chinese way of looking at the Chinese market: It is not a real bear. The government whipped the market down. It increases bank reserve for the nth times to 13.5%, prohibit bank lending, no new mutual funds,.......you name it. It is the weight of the government which wear down the bull. They succeeded in preventing a bubble, don't they? But, it is still a bull. When are they going to lift the weight? You guess it right! 2008 Olympic game. The bull will jump over 6,000 (Shanghai Stock Exchange index). When it comes to analyzing Chinese market, technical analysis only help a little. Try to analyze Chinese official mentality.

[Hen Peck]

It's very dangerous to write an article such as this, especially when the market had a huge rally. People who believe that the Chinese stocks are in a bear market now might short the stocks and get hurt quite badly, especially when we see such an "up bull" market like we had on Wednesday.