History is a mirror- China Market

August 14, 20001

My two articles (4/28/2001 and 7/5/2001) on Chinese stock market movements are very accurate. The Chinese stock markets of Shenzhen and Shanghai both plunged like a rock, and reach the neckline level exactly as predicted.
              

The technical features are also amazing in that both market produced the kiss goodbye formation (KG) after the index broke the down side of the wedge formation (see Fig. 1 and Fig. 3). The index after breaking the wedge's lower line, the support line, and drop further, and come back up to touch this line which now turn into a resistant line (standard rule), and then go back down in another plunge. This is a classical technical behavior, and I called it kiss goodbye formation (KG).
            

Part of the reason that the author can predict this so precisely is because he has no involvement in Chinese market, and thus can look at it with a clear and analytical mind, and perceive the situation from a cool distance.

Forecast

Just as being forecasted not long ago by the author using his knowledge in stock behavior, he did the same and perceive the future of the Chinese markets as follows:
The author expects that the neck line (NL) will have enough support for both markets in the first attack, so the down move of the index will be stopped at the NL level, and then bounce again. The neckline level for Shanghai composite index is just 1900 points.  The top formation do have symmetry features, so Shanghai composite index (see Fig. 2) will produce two right shoulders above the neck line in symmetry to the two left shoulders. The Shenzhen A index (not shown) will behave similarly. This prediction implies that the Chinese stock market will have a long horizontal movement between the top level and the neckline level. So it will take considerable trading time to turn around the market mood. But when the index do drop below the neckline level, the down move can be fast and devastating, and will dwarf the down plunge that the Chinese are now experiencing.
         

Remarks
This forecast is in great contrast to the popular believe that market movements are base on everyday news but not its history, which has long been accounted for. The rules behind this forecast imply that there is an invisible hand controlling these formations. The future is a reflection of the past.