Is this the end of the China miracle?
I recall many years ago ( many, many years) while I was schooling, I came across this comic strip with a Japanese boss pointing to King Kong clinging on top of Chrysler building and his assistant told him, " no, sir, you can't buy the monkey on top of that building."
I remember Japanese Yen was growing very strong against USD in 1985, and all Japanese were out shopping, out of the country, I mean. It was soon after that that we have our market slow down leading to the recession affecting the whole Asia. Ever since then, Japan has never recovered from its fall, even till now.
During the 90s with the emergence of the 4 small dragons (Singapore, Hong Kong, Taiwan and Korea), Asia was at its pinnacle of growth. This lead to the flourishing of Asean due to overflow of business orders. Asean in fact was in its golden years.
I remembered at that time they were contemplating on increasing their membership size by taking in Vietnam, Cambodia and Myanmar (if my memory serve me right) raising the objection from USA. Indonesia in particular was bold and proud enough to retort US by saying that this was an Asean issue and Asean need not interference from the USA.
It was right after that in 1997 that the currency crisis leading to another recession with Asean market wiped out.
Why am I writing this? Because the action of certain country reminds me of the behaviour of these nations right before they fell, if you guess China, you are right.
For the last few years, we were witnessing the abundance of wealth displayed by the Chinese nationals. Where ever they went, they shopped. All the while with a show of arrogance and displayed wisdom of ignorance.
I watched a youtube program under "China Uncensored" which discuss China matter and came across this segment about a Chinese Entrepreneur presenting at TED exclaiming how China go it right with communism and that US won't be able to compare to China on its competence. He further justified how much China have in meritocracy, legitimacy and Flexbility under the communist regime.
I shaked my head over his level of ignorance and arrogance. At the same time, I can't help but to wonder how they are now closely resemble the Japanese in 1985, Asean in the 90s. I am contemplating the time when China fall from grace.
Fig 1 Shanghai SEC weekly chart
I have just bought my data plan for world indices, and since China was on the news lately, it is worth while taking a look. I can flash back to around 2008-2010 when my interest was triggered by comment of China market collapsing, I laughed it off since China was at that time at a bottom (not the bottom). Since then China has developed a bottom formation and since 2014 has shot up. It was a spike move. By then it would have broken through the second support line.
However, there is nothing to be happy about, firstly, SSEC retreated as fast as it shot up failing to reach the previous high. Second, it broke through the neck line support. Third, it is on a "C" wave downward. "A" happened between 2007-2008, "B" from 2008-2015. This is the most important part, since there is not much pattern show the seriousness of the situation, r may be there is. If I consider a flag formation formed in the second half of 2015, it should at least head for 1,500 mark.
The only consolation is that there is a multi-year support at around1,700 mark which wil halt its fall.But if my reading is right, it will eventually fall through 1,000 mark with minimum objective of 667. I can' imagine what would happen in China by then. Am I seeing the beginning of Chaos in China right now?