How Bubbles Work: Hang Seng Bounce to End?

imageHaving got out gold price decline fairly well-nailed last week, we find ourselves (me and Zeus the Cat) looking at the charts this morning and wondering if the gold decline isn’t just a little over-done?

Ideally, we would flatten out to rise a bit toward the end of the month and then the price would go into another $30-40 decline for the end of month so deliveries would be cheap.

My consigliere called Monday afternoon with a few remarks on point, which I’ll poorly paraphrase:

“People don’t understand the dynamics of gold very well.

They think when a big market – like China lately – gets into trouble, everyone will run to gold as a safe haven.

But that’s not what happens.  People who have suffered losses in the paper markets will need to sell anything they have – INCLUDING GOLD – in order to meet margin calls.

So I think that while it may seem like an over simplification, there’s something to be said and it should be in Trading 101:  Good assets are sold to cover bad assets when your but is in a sling…”

Yes. 

The first thing we can do is look at the price of the Hang Seng and a chart over here.

As you can see, the market went from a high around 28,440 at the end of April and fell to a low of 23,516.  That’s a loss of more than 17%.

The problem is that the Chinese market bubble is not over with, yet.

As you will remember from some of our recent charts on  the Peoplenomics side (it’s really worth the $40 a year) we explained how most bubbles nowadays have a similar formation, to them.

The two charts at the top of the column this morning are a fine example.  the top chart is what the run-up and collapse of the Dot Com bubble was like.  The bottom chart is how how the BitCoin implosion went.

Zoom out to a five or 10 year view of the Hang Seng and what you will see is that in Elliott Wave terms, the Chinese market has just done a “wave 1 or a down” and its somewhere in here things will get really interesting.

The reason?

It’s not really a down move on China’s part, unless the old low, and in this five year perspective, it would be the lows around 23,000 which we saw in October of last year.

The question is whether the Hang Seng is really making a major corrections, in which case the market could lose almost half its value – which would imply sinking to the 17,500 range, or whether this will be more of a mess than even this.

Still, from recent all-time highs, the Chinese market looks a lot like it is in a B wave rally and the odds of a C wave to new (recent) lows – and beyond – would sure make for an interesting speculation.

I don’t make those kind of bets anymore. 

Still, when the 90-freeze comes off in China, and with all the overspending envisioned in turning Beijing and surrounding provinces into a multi megacity of 130-million people, I can’t help but think that the market is choking on some of the grandiose plans of Party leaders.

There’s one more way to look at this:  In October of 2007, again this is an Elliott kind of interpretation – the Hang Seng sailed over the 30,000 mark. 

But in the spring of 2009, it had dropped to the 12,800 area.

So, do I think the we have seen China in the same kind of recovery from the US Housing and consumption bubble?

Yep.

But time will tell, and the arrival of a genuine long-term rally (not just a 6-year B-wave or 2) will only be confirmed if the Chinese market goes on to a new high promptly.

With the end of trading controls hanging over the market like a guillotine, I just don’t see it.

But it wouldn’t be the first time I’ve been wrong.

No Iran-Like Deal for NK

Is it me, or has NK leader Kim Jong Un lost a couple of pounds? 

Sure looks that way in this CNN story about how the kid at the helm is not interested in negotiating an Iran-style stand-down with the West.

Got to admit, it would be a hard choice:  Do you want to cut a deal with the West and let financial cutthroats, like the ones ravaging Greek in the house?  Or, do you do the Iran option because otherwise, Israel might launch a sneak attack?

Tribal Warfare

It’s never gone out of style.

Oh, sure, we like to thing that humans have evolved to new and higher strata, but the data just isn’t there to argue otherwise.

India has seen a sharp rise in communal violence during the first five months of the year, reports Time.

It would be a dream to think that empowering people with technology would allow people to reach out to one another and negotiate their differences.

But it doesn’t work that way, or at least hasn’t so far.  Whether you’re talking Ferguson, or the social mobs that rip of retailers in big cities.

Not all Flashmobs are bad…just the ones that hurt people and their businesses.

The reassuring part of technology is that it’s turning out to be like any other tool;; it can be used for good or bad.,

A piano can play a sonnet or it can be dropped on someone.  Shovels can dig wells, or graves – it’s the damned curse of choicing in today’s world, ain’t it?

Political Correctness Implosion

OH, no!  “Pride event bans drag queens performance because ‘they might cause offense” to the transgenders attending..

You see?  This is why I keep my ViseGrips handy.  I need constant reminding which planet we’re on.

We Can’t Handle the Truth, Dept.

Richard Nixon said what on his first call to the moon?  Making the rounds…

Other than being awkward, ask yourself this: 

Who was doing the outside camerawork?  Outside?  Who?

Don’t look now but we’ve got some questions here…

Where’s my damn ViseGrips gone…

Dow’s looking to open down 50 and gold is bumping along 1,100…another day in the Worker’s Paradise, is it not?

Comments

How Bubbles Work: Hang Seng Bounce to End? — 15 Comments

  1. Lately it seems that all I hear on the news is the story about Lindsy …Oops .. but out of all the times I have heard about this..My random thoughts and opinions in my curiousity is this. Not once have I heard the much bigger and way more important question that should be brought up.. sure he passed on a phone number that Lindsey didn’t want to be passed on.. NOW where I see that the bigger question that should be addressed is when.. When Lindsey gave me his private phone number and email address he said not to share it with anyone.. I am sure he told all of you that as well….. OH MY WHATS THIS… I don’t have access to it..and I never will … so why does a Billionaire have access to that.. or did Lindsey share that with him or some of the Donald’s employee’s that gave him access to such a sensitive and private number… Just a random thought..What I like about Donald is if he became president He wouldn’t hesitate to tell congress just what he thought right or wrong he wouldn’t play the dc two step and I think he would be a lot like my favorite president Ronald who also took his concerns to the people where the concerns of the people should be addressed by those that they hire to lead them…

  2. real estate has been the beat thing i ever spent money on except for that one thing so many search for — /KISS/—Knowledge Is Success Simplfied/ that is why grandparents matter so much , hug and kiss your kids / and dont neglect that beautful wife/ because a single olf man like me may —–/ but dont worry i have a girl friend gottcha even old men would give you all their possesions for to have their last remaining days in harmony

  3. how to lose money and how to have had made it-
    dcim was a company that was into dental photography and i as a neophyte invested and they went out of business, then after licking my wounds i said i will invest in something more tangible and close to home like charter communications so i put close to 20 grand in , and they filed for bankrupty in nov 2009 , then 10 months later they relisted on nasdaq and the price now would have made me now a millionare stock holder of chtr if i had invested in chtr after they went bankrupt and came out with little debt ,,,—–this is why i say we will have a beautiful future if we can hold out

  4. HELLO ,this matrix is really .,really IS alive yea ,ITS RECIPROCAL,it goes around and comes around real quick,—–
    HELLO , the only thing bankers past down to their kids is war ,violence and drugs with an overdose of sexual abuse and controll
    good news is we can have a beautiful future, which pill will you take

  5. I believe, that the Soviets had a LOT of interest in being the first to land safely, and then to return to earth from the moon. A little thing known as telemetry – available to the now defunct USSR would have easily shown whether or not the USA had landed on the moon and then sent radio waves back to earth from the moon. The fact that the USSR, which had a “dog in the fight,” did not scream from the highest mountain that the Apollo landing was a fraud – goes a very long way towards giving credence to the fact that the USA did land on the moon.

  6. I completely understand the logic of selling gold against losses – but I have to laugh when the selling is $2.5B in less than 2 minutes on a paper exchange without the benefit of a stop loss and another $550mm after the close or both at the most illiquid times of trading – this selling is to cover losses – I think not.

  7. Had to think about “Outside Camera” for a minute, but I think I got it. At the :40 mark.. the shot from outside the capsule looking in. OMG LOL May I borrow the vice grips?

    • Looked like clips cobbled together, including in the beginning one taken of the astronauts maybe in a simulator. I seem to recall that they were aiming for the event to take place on July 4th and I saw a date on the film saying July 2, 1969, thus the idea that it is a lot of clips, with voice over of the Prez’s congratulatory remarks. In his new show this morning (7/21) RCHoagland said there was only one camera between Armstrong and Aldrin, and Armstrong had it, so the pics we see of them outside were taken of Aldrin (unless, once at least, Aldrin got the camera). When there are two astronauts shown on the surface, I suspect a new device called a “tri-pod” was used. Right near the end of the video, looks like HR Haldeman, of Watergate infamy.

  8. About that ‘outside camera work’ – I remember eagerly watching with my folks the moon landing (even going out later that night to look at the moon with my two eyes and thinking ‘There are people up there!’) – don’t you remember that cameras were positioned on the moon to take pictures, including film? As to what was on this ‘clip’, it was obviously severely edited as the ‘time interval’ between when Nixon was speaking, and when Armstrong replied would have been in the range of several minutes at least . . .

    (Are you thinking in terms of the movie ‘Capricorn One’? Just a movie, George, just a movie . . .)

    I think that Kennedy and Johnson had everything to do with the Apollo missions happening and despite Nixon and Ford getting the ‘praise’ for the missions being done during their time – those two would have been responsible for the ‘killing’ of the Apollo program. We lost our ‘dream vision’ when that ended and we got mired in the Vietnam war and later international conflicts . . .

    • absolutely the movie was just that.. I had the pleasure of knowing and having some very in depth conversations with one of the main scientists that did logistics and planning of the Apollo missions.. One of my main career choices was one of personal service and I can tell you that I have absolutely no doubt that we were there.There isn’t any way he was lying to me about it. we went and we all rejoiced in a proud moment in American History.. Now did the United states fake some photo’s to make us look bigger and better.. there is a possibility that we did that especially this all happened while we were in the height of the cold war.. but I have absolutely no doubts that we were there..in all our pride and glory.

  9. Dude, you’ve gone and done it, reopened the can of worms that was the Apollo program. We had all finally accepted that maybe it was real, and now we see footage from “outside” the capsule. Maybe my ol’ uncle Willy was right after all, it was a fake.

  10. George,

    Umm, your comment about Apollo outside footage was sarcastic, right? That view was into a Apollo command module mockup used for training. Stock footage. Just sayin’

    Paul