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Jul
12

Don’t worry about Greece when China is ready to implode

By
Anatomy of a stock market bubble - China Shanghai Composite 2015

All the worry right now is about Greece and the impact a “Grexit” will have on the European Union’s finances.  But I argue that the impact of the last 4 weeks of fear on the Chinese stock markets pose a much greater threat to the world economy.  In this article I show the Crash Detector System in action and how it shows us impending market failure.

The fact that the Athens Stock Exchange’s (ASE) value has decreased by 50% in the last 4 years and that the nation of Greece is on the cusp of financial ruin, is enough to give the citizens of Europe’s leading powerhouse Germany many a beer hall discussion and the occasional sleepless night.  But is that what we should really be worried about?

Sure the Greek fiasco highlights the imbalances in EU economics and the lack of political union means different taxation and benefits laws across Europe, but what will be the impact to the world economy?

Negligible.

Greece represents 3% of the GDP of the European Union and while bailing out Greece is wrong in principal as you cannot keep borrowing without making the right reforms to become competitive, whether Greece remains in or out is already priced in to the markets.  The Frankfurt DAX (FDAX) has lost 8% in the last 4 weeks and the Paris CAC40 (PCAC) lost 14% these are small drops in the ocean.  European Union banks and institutions have had plenty of warning that this problem is on the horizon and have made significant steps to limit their exposure, meaning that the ramification of the “Grexit” are mostly priced in to the market.

Uncle XI’s Bear

Uncle Xi’s Bear Market, is another thing.  Uncle XI’s bear market is what is meant by the state sponsored pumping of the Chinese Stock Market in the form of the Shanghai Composite (SSEC-X).  With the bubble geometrically expanding in the Chinese Market the people of China were encouraged in May 2015 in the Chinese Peoples Daily newspaper to “buy a piece of the the dream”, the “good times are only beginning”. Source.

The below chart shows the 3 year history of the SSEC, I am using the “Stock Market Crash Detector System” that I developed to highlight to Bear Market Signals and Shock Event Warnings that have occurred throughout this period.  Anyone using my system would have been on high alert before the crash and profited from it.

Click to Expand - Anatomy of a stock market bubble - China Shanghai Composite 2015

Anatomy of a stock market bubble – China Shanghai Composite 2015

There are many points raised by the technical analysis, here.

  1. The Market has been in a long term bear downward trend 2013 to 2014
  2. Suddenly the market shifts from a bear to a bull market in July 2014
  3. The Crash Detector System flagged a Buy Signal
  4. The market moved up an incredible 120% in one year
  5. In May 2015 the systems flagged a shock event warning.  Normally this kicks in just before the market moves into a major bear market.
  6. In June 2015 the market loses nearly 30%

I hear on facebook groups and investor communities people are now jumping in to invest in the Shanghai Composite (SSEC) as they see it as ready for a bounce back.  This is the equivalent of catching a falling knife.  They are what is called the weak money or weak hands.  The reality is that the home grown Chinese investor has lost faith in the market, and will not be re-entering the market soon.  The crash has only just begun.  The Chinese authorities are so scared they have halted trading or placed sale restrictions on the majority of stocks in this market.

What will be the ramifications on the global economy?  It is difficult to tell.

The worlds biggest economy, by some measures, will be going through a series of gyrations in the next 6 months at least.  Baton down the hatches and seek opportunities to profit whilst shielding your capital.

 

If you do not understand some of the concepts shared in this article I recommend:

  1. Purchasing the Liberated Stock Trader PRO online training including 16 hours of video training
  2. Purchase the “How to avoid the next stock market crash”. This is a system (explained in an eBook) based on technical analysis that is simple to apply and works on nearly every stock market.
  3. For Coaching Services and personal training see our coaching section.

 

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