Monday Jan 30, 2012
Some are calling for a 'soft landing' in China citing how the Chinese govt is reigning in speculation.
Well take a look at these photos of Chinese Hawaii. Just as we have Snow Birds who come to Central and South Texas to escape the northern winter in the US, here are developments just for the same group in China.
In a country of well over a billion people, these are amazing photos. It is cearly well into the day when they were shot but notice there is not a person, or rarely an auto or even a bicycle or moped in any picture.
Recall that banks loan real money for to buy the brick and mortar for such projects. But once complete the project is worth is discounted present value of future rentals, I am assuming rents since none of these are sold. A plunge in the PV means a plunge in the market value or the real value of the loan on the books of some Chinese govt backed bank.
This won't end well.
Shanghai
Since breaking below the 200 day MA in May, the SSEC has had two failures just over the 50 day MA
and looks like it is setting up for another. Meanwhile the US SPX has rallied well over 20% from its Oct. lows. This is an ominous warning for all the Pacific Rim economies all of which are 'leaning' on China.
The April high 3057.33, the Friday close 2319.12, a drop of 24.14%, a true bear market. Notice you hear little to nothing about the Chinese growth economy in the media these days. Japan has had its first trade deficit in decades and all the news is on Europe.
Meanwhile back at th SPX Ranch...
Recall that most software computer programs which generate buy and sell signals are couched in the action of th 50 and 200 day MAs. In August therefore when the 50 crossed over the 200 to the downside, a cascade of sell orders were generated and the market fell sharply.
Now we are looking at the same thing in reverse. When the 50 crosses the 200 to the upside we are likely to have short positions being covered and fresh longs established. I covered this last week in some daily updates. But it is pretty clear in this chart what is aobut to happen. The pullbacks the last few days and tenative pullback this morning are typical of the hesitation on the long side.
I don't know when it wil happen, the bfreak out that is, but February is shaping up to be an interesting month.
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