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Citi Warns Chinese Stocks "Look Precarious", Fears 23% Downside Correction
The Chinese stock market is "looking prercarious" according to Citi FX Technicals' team. A bearish outside day on the Shanghai Composite could represent just the first of a series of technical patterns that suggest a potential 23% correction... as 100s of thousands of newly minted margin'd retail equity 'investors' find out the hard what a tap on the shoulder feels like. As Paul Sinder warned, "take a look at a chart of Chinese retail margin debt, but not just right before bedtime. It looks something like the U.S. figures heading for 1929."
Via Citi FX,
- The Shanghai Composite Index posted a bearish outside day in today’s trading (see insert above)
- This suggests a return to the recent low from January 14th at 3,095. A breach of that level would confirm a double top that would target a decline to 2,785
- Such a move would break through the 55dMA for the first time since July 2014 (on a closing basis).
- Given the stretched moving average dynamic a breach of the 55dMA would leave the way open for a move to the 2,415 – 2,445 range, where the 200dMA converges with support from the February 2013 high
Everything's fine...
Perhaps - more fundamentally speaking - Elliott's Paul Singer sums it up best...
A universal belief underlying global financial markets is that the Chinese government has complete control over its economy and financial system. We cannot know whether the corruption, bad loans, see-through projects, and internal dynamics of the Chinese system are bad, very bad, or headed for a crack-up, but any set of developments that challenge the widespread assumption of complete Chinese control over its destiny would be a very large shock to global markets.
We suggest you take a look at a chart of Chinese retail margin debt, but not just right before bedtime. It looks something like the U.S. figures heading for 1929. But there is no way for outsiders to know the net of the balance of forces, and whether the negatives are overwhelmed by the Chinese economic growth juggernaut.
To paraphrase Senator Everett Dirksen: A trillion dollars of margin debt, a couple of trillion dollars of sour loans, a trillion dollars of wasted capital projects, and pretty soon you are talking about real money.
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Does this have anything to do with the Saudi royal family pulling money out of your stock, Citi? Are we now taking our ball and bat and going home? Good. Fuck you, Citi, and the camel you rode in on.
Tyler, WHAT? ...Did the world just become a beaming light of truth and reason?? Sell offs haven't been allowed for 7 years, and China is no exception. Sunday night dribble!!!!
Actually China has been the exception. It is still down 40% from its 2008 peak, the Chinese stock market. Citi should be more worried about the situation "at home", which is definitely of a much greater magnitude bubble-wise.
China was once The Middle Kingdom and as secure as the Roman Empire, but it will never again recapture the crown of economic nor military superpower.
It sold its soul in a Faustian bargain with the Shylocks of Banking & Finance (i.e. Wall Street) when it agreed to become cheap numero uno factory floor for the world's desire, rising then falling, for low value-added goods.
It tried to hedge against permanency of this position by requiring strict JV agreements with foreign firms thinking it would cull technology transfers on the cheap, that would allow it to leapfrog its way onto the top bracket, but did not anticipate all the competition for the position it now occupies by nations hungrier than it, willing to degrade themselves for a much cheaper price.
China's economy is trending more and more quickly into one of history's greatest House of Cards as it tries to deflect the damage its Faustian pact with the Shylocks did.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
As much as it PAINS me to say this, The PBoC has been eloquent with it's easing.
The Fed. however, has been vague and complacent, in it's policy. The Fed. is rapidly losing credibility.
So where do "folks" like this (I'm gettin' kinda warmed up to that "folks" stuff. Thanks, Barry) come up with numbers like 23%? Why not 25% or 22.375%?
Inquiring minds are just curious. (See I said minds so I get around that cat thingamajig)
Thanks.
Citi is shorting the market and is set to exit the trade once it is down 20%
The extra 3% is there to give them some additional time so they can then create a long position and set the charges to blow the muppet stops like the floors on WTC1&2.
'nuff said.
You're NOT going to like my suggestion Knuks. It's the antithesis, of everything your career was built on.
( compound interest)
Stay liquid & buy antiquities. I'm not going to tell you when the $usd corrects.
Commodities. Pots, pans, cigarettes, dope, crack, water, preservable food, ammo, guns, fuel, prescription drugs, blankets, heaters, tents, knives, camels, oxen, etc..........
It is just about getting around to that time isn't it...
Common sense. I'll bet you were fingering a 5th grader in 08?
Ignorance is bliss/
like the 55 day moving av why not 54 or 63
I'll pull those figures outa my ass on the fly.
If your're stuck in that trade, I'd buy some "expensive" in the money options to save your ass and break even.
But despite a very similar chart pattern, US stocks are, of course, just fine.....
Tyler, for the love of all that is holy, get rid of those damned video ads. They are so annoying.
Install Adblock Plus, then no more ads of any description....;-)
Just print another 1000 trillion to buy up those trillions...
dear god ... people still using technical and fundamental analysis in this market?
they know nothing [/cramer]
Boo Yahhh BitcheZ. Face Plant
Sorry, but my vote says China will do just fine.
Does anyone really think that a several thousand years old society is as guleable as the uniluminated, freemason, joke that is the USA and especially that crackwhore of all banks, namely CITI.
Furshizzle !
You're correct. The recent trading band (2%) range was broken briefly. The Yuan was being undervalued vs USD for the coming correction.
The Yuan hit the upper end of the "trading band" on the Strength of $USD. Common sense traders?
If a turd like Citi calls you smelly, does it mean anything?
"23% correction"............. not 24%?, not 20%? not 22%?
An obvious attempt to make their prediction more plausible, cuz they are ssssooooooooo specific, it must be true!
Lame.
The PBoC allowed the Yuan to Float briefly... The PBoC wasn't trying to devalue the Yuan.
Ha, ha, ha, ha. Citi is BK. Hello.
A 'technicals team'? Since when do technicals matter in a central bank planned world? Technicals would say the US market could not go 5 years without a correction - but it did.
If this looks so much like1929, then why would the correction stop at only 23%?
Far more value in the Chinese stock market than there is in the US market. Amazing how Citi is still under the delusion that America > *.
you forgot to put the rest of the world in. They will see a 50% decline, so China's 20+% is somewhat chump change. The world is about to embark on a major global reset/correct. Its going to get nasty so hang on to your knickers. All the paper pushers will be lining up in the tallest building to extinguish their misery. You could start charging for entry in the not too distant future.
Problem with this is that no one really gives a shit about the stock market here. it's not tied to anything that actually matters.
[Ignore]