Shanghai Stock Exchange Composite

I was involved in an Internet Forum today and someone posted an article about Shanghai Stock Market going to crash as claimed by an econophysicist (really have no idea what the hell it meant). The article showed a 60Deg ascenssion of the SSEC and the author predicted a bubble burst estimated between 17th to 27th July 2009.

I was curious about how accurate the author is in predicting the China market so I opened the SSEC chart to take a look.


Fig 1 SSEC Weekly

I nearly laughed off my chair when I saw the chart. To begin with SSEC has just come all the way down from its top. It is at the very bottom of the sea. Since its bottom out, it has only retraced back to 38.2% from its top.

Of course base on Fibonacci retracement, it is one of the ideal place for a correction. However, the situation is far from qualifying for a bubble. In fact the author might have been late for more than a year reporting a bubble on SSEC. He should have reported it by Oct 2007.

Looking at the chart, if my wave count is correct, the counter wave is completed. I am not too sure since the C waves that I consider is a little small. If the case is true, then SSEC is on a new wave. There is a chance that SSEC is on completing wave 3 and ready with 4th.

The strange thing about the chart is that I do not see the formation o bottom yet. While SSEC might not yet have a bubble, it is still not out of the woods yet. My guess is that there is a loooooong way to go, 2 years may be. I would think that the chart would come down with a second major wave to create a double bottom.