2012-03-31

Chinese stock market headed for wave 3 style plunge?

ZeroHedge has eyes on China with a late Friday post on the Chinese market.
As we write, it seems beyond dispute to say that the Chinese hierarchy is battling it out behind closed doors to determine the long term future of the regime and, by implication, the direction of the entire nation. In such momentous times, we would perhaps be foolish to think that the routine application of short-term countercyclical policy will bear overmuch weight in their counsels. Simply out, there is too much political infighting for any large-scale action to be taken as "Having moved against the state-capitalist left of old man Jiang and his Chongqing bruisers, surely the last thing Hu & Co. would want in their final months in office would be to unleash another oligarch-enriching orgy of speculation of the kind such a mass stimulus would be almost bound to foment."

In contrast, while most of the wave counts I've seen make allowances for declines, even to test the 2008 low, they all seem to place the previous high as a wave 1 top, with wave 3 coming next. While social mood remains negative, the market is still the indicator and an upturn in shares would not be immediately correlated with positive news.

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