What do you see when you look at China's main stock market, the Shanghai Composite Index?
Answer: The all-time greatest illustration of the failed cause-and-effect logic of fundamental analysis.
Here's how. Back in late 2008, China had gone from being a global economic superpower -- to -- a lightening rod for political scandal, economic setbacks, and social unrest. On this, the following stories from the time paint a bleak picture:
- December 2008: Grim job outlooks spark labor strikes in several industries -- from taxi drivers to toy factories -- prompting one new source to this observation: "The entire balance of the Communist One-Party rule hangs by a thread." (AP)
- Third-quarter 2008: Several key gauges of manufacturing fall to record lows, industrial output slides to a seven-year low, and China's overall economy expands at its slowest pace in five years.
- Around the same time, the Western beacon of growth, the United States, continues to endure its worst financial crisis since the Great Depression, alongside a steep crash in the Dow Jones Industrial Average to a five-and-a-half year low. AND -- China's own Shanghai Composite Index stands more than 60% below its October 2007 peak, at a two-year nadir.
By all fundamental accounts, the mainstream experts saw no light at the end of China's tumbling tunnel. "We are helpless," began one news source. "The ugly showing of Wall Street is rippling." (Reuters)
And these others: "Scrooge reigns in Asia" (Forbes) ---- "China's Bull Gets Shanghaied" (AP) ----- and, "I'm struggling to find a catalyst that will turn this market around... Clearly the situation is fairly ugly at the moment." (Bloomberg)
YET, "turn around" is exactly what China's stock market did: From its late 2008 bottom, the Shanghai Composite Index took step one UP in a powerful, 34%-plus rally to this day.
Now, while the usual folks saw no end in sight to China's bearish captivity, Elliott Wave International's Asian stock market experts foresaw the start of a meaningful uptrend. In the December 2008 Global Market Perspective, our analysts presented the following close-up of the Shanghai Composite and wrote:
"The Index has completed five waves down in its decline since 2007. It has also just broken out of the orthodox trend channel that contained its decline over the past year. For now, the ball appears to be in the bulls' court."
The fact remains: While fundamentals have kept the mainstream experts BEHIND the biggest turns of trend in China's stock market, Elliott Wave analysis has remained one step AHEAD.
Another case in point: One month before the Shanghai Composite Index hit its all-time peak above the historic 6,000 level, the
September 2007 Global Market Perspective on high alert to the market's downside potential. In
GMP's own words:
“The only bubble that continues to expand is that in the Chinese stock market. The following statistic suggests strongly, however, that its peak cannot be far off.”
Find out how long the uptrend in China's stock market might last, and whether its rising tide will lift all markets across the globe. The new, April 2009
Global Financial Forecast has the answer in full -- and it's yours 100% risk-free.