Wednesday, September 26, 2012

"Shanghai Composite Update"

As soon as I wrote:
 "We've gotten about 15% (to the downside) out of the Shanghai index and it may be time to re-think the master plan for world domination (ours, not China's)
The index is holding 1% above Monday's 44-month lows."
in yesterday's "China's Conference Board Leading Index Spikes, at Odds With Shanghai Stock Index", I thought "What's a word for arrogant overconfidence?". Then I hit the "send" button.
Sure enough the index promptly traded down to 1,999.48 before closing at 2,004.17, multi-year lows on a closing and an intraday basis.

Here's Doug Short at Advisor Perspective:
Last night the financial press featured the decline in the Asia-Pacific markets: "Asian Stocks Fall on Investor Concern on Stimulus Effect" and "Asian shares fall on wariness over Spain" (more here).
Japan's Nikkei fell 2.03%, dropping it below the 9,000 level. But that's a line in the sand that the Nikkei has crisscrossed many times.

More striking was the 1.24% selloff in the Shanghai Composite. Why? The index briefly dipped below a more significant line in the sand -- its 2,000 -- hitting an intraday low of 1,999.48 before closing at 2,004.17. Will the 2,000 level provide support?

As the chart above highlights, the last time the Shanghai closed below 2,000 was in January of 2009. This will be a level to watch in the coming days.