Friday, 29 May 2015

China maxed out at 5K ?

Whilst the US market saw a day of moderate weakness, the more dynamic action was in China, having seen a natural bearish reaction from the giant psy' level of 5K. The net daily decline of -6.5% to 4620 (intra high 4986) was certainly severe, but such pull backs are to be expected.

China, daily

China, monthly


The Thursday session for China certainly merits a mention.

Having hit a new 7yr high of 4986, the market saw an initial rejection.. a few hours of churn.. but then a sharp closing hour sell down, with a net daily decline of -6.5% @ 4620. Such severe daily declines are to be expected, with the Shanghai comp' having seen a hyper-ramp from last summer.

Has China maxed out at 5K? Short term... that could very well be the case. Indeed, with the break above 3400 the natural target has always been 5K.. rather than 4K... or 6K.

A full retrace to the key breakout level of the 3400s is viable at any point this summer. However, on the bigger time frame, new historic highs >6124 look a given - whether late this year.. or in 2016.

As for US equities...

sp'500, monthly

A net monthly gain looks a given, even if there is sig' weakness on Friday. Considering the recent new historic high of 2134, the equity bears have nothing to tout right now. The broader trend remains intact.

Looking ahead

Friday will see GDP (first rev), market is expecting a downward revision to -0.8% from +0.2%. It would be pitifully ironic if the market ramps on a 'better than expected' negative GDP number tomorrow.

Data also due: Chicago PMI, market expects a non-recessionary 53.1. Anything under 52 would likely spook the market, and be a renewed warning about Q2 GDP.

Goodnight from London