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Wednesday, May 5, 2010

CHINA JUST SUFFERED A MAJOR BREAKDOWN

Well… China gave it a fourth go-around. As expected, it failed.

Back in April, we noted the miserable series of "lower highs and lower lows" being registered by the "Dow Industrials of China," the Shanghai Composite index.

Chinese shares screamed higher in 2009… and reached a blow-off top in August. But over the past eight months, the Shanghai Composite has made four attempts at besting that old high. Each effort failed more miserably than the last. The most recent failure is a serious one…

As today's chart shows, the Shanghai index has failed in its latest attempt to rally. It has plummeted from the 3,100 level to reach its lowest point in 2010 (A).

Many brilliant analysts like Jim Chanos and Marc Faber are predicting a severe economic slowdown in China… even a huge asset crash. Every good trader knows the market leads the news… and knows this latest break in Chinese stocks could be the start of something much worse, as Chanos and Faber predict.

Now let's keep an eye on the longer-term low of 2,700 (B). More to come on this potential meltdown…

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