Shanghai Can't Break Through 50-Day

Below we provide a price chart of China's Shanghai Composite index, which is currently down nearly 36% year to date. After staging a rally of more than 20% in late April, the index has once again corrected more than 10%. As shown in the chart, the index just hasn't been able to break through its 50-day moving average.

click to enlarge

Comments

[kelaido:]

The 50dma is proving to be formidable the last 3 weeks. Volume is sympathetically trending down as well, indicating lack of buying interest, rather than selling pressure.

2008 May 27 07:57 PM

[johnthebear:]

I think the world has finally come to realize that China markets are a bubble that is slowly deflating and now it appears that the games will not materially add to safety or security of the stock markets in China. China does not live in a world of it's own and there is huge over capacity in a declining business cycle.

Investors have a terrible problem of figuring out where to invest when interest rates are lower than inflation and stocks are in a downtrend and commercial real estate is heading down, lagging the market. There are just a limited number of stocks that pay dividends and will remain healthy as stock prices generally decline.

Main advice is to be cautions and patient. Lower prices are heading our way and many will be hurt who have to sell in an oversold market. The problem is this decline will likely be much longer than most people understand.

2008 May 28 08:41 AM