The Chinese Stock Bubble Bursts: Any Questions?

June 26, 2015

When financial authorities are in full-blown panic, they cut rates.

Take a quick glance at this weekly chart of the Shanghai stock market:

1. Uptrend broken: check

2. MACD rolled over into a sell signal: check

3. Stochastic breaks down: check

Any questions on what's happening to the Chinese stock market bubble?

Those still entertaining hopes the bubble hasn't burst might want to ponder the frantic flailings of Chinese authorities as A Desperate China Cuts Key Policy Rates.

When financial authorities are in full-blown panic, they cut rates. When financial authorities are in full-blown panic, they deny being in a panic, which proves they are in a full-blown panic.

A reasonable technical target is the 200-week moving average, roughly 50% of the recent high. "Impossible," say recent buyers of Chinese stocks. Yes, of course it is. The authorities will never let the market decline by 50%. As always, this time it's different.

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