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|Mark's Column Professor Kai Keung Mark|
First Bull CallSep 15,2009
The author made a very early bear II rebound call on Dec. 4, 2008 (another rebound is coming), and stated that this rebound will be very extensive, and beyond most investor' s expectation (Dec. 4, 2008; May 14, 2009 ). This statement certainly have come true. Even the author himself is also surprised by the 86.5% rebound of HSI. As the rebound progress, the author continue to write articles on its current out look such as confirmation of the bear rebound forecast (April 19, 2009), time to sell (may 14, 2009), the forecast was correct, your choice (July 7, 2009). The market did turn as proposed, but did not go down extensively enough as the author expected for the bear III down wave. So the author sat back and reviewed the whole picture, and found two major signals that had been overlooked which led to the recent inaccuracy.
The author had pointed out that the big double head or head and shoulder formation may signal the arrival of the bull turn (April 19, 2009), but did not take it significantly enough because the author still treat DJIA as the world's stock market leader. US property market continued to go down while the unemployment rate continued to go up, and no sign of bull turn was in sight.
The second major signal that changed the author's perspective is the fact that hot money of the world is flooding the Hong Kong financial market, driving up Hong Kong's stock market and property market extensively. Such extensive flood of hot money convinced the author that Chinese economy is recovering fast, and may lead the world in recovery from this recession. By August 1st, 2009, Shanghai A index has rebounded 102.3%, HSI rebound 86.5% verses a 33%-56% recovery of the western world markets (DLIA, 40%; NASDAQ, 56.2%;UKX, 33.2%; DAX, 46.5%; CAC, 39.3%; NKY, 46.9%).
Base on these two signals, the author decides not to look for bull sign from the US market, but look for bull signs from Chinese markets. The Chinese economy was significantly affected by the drastic reduction of export, but the increase in internal consumption, and easy money supply allow the Chinese economy to recover much faster than the western world. This fact have attracted international hot money, to flood the fast recovering Chinese economy.
Now the author changes his perspective on HSI, and assigns bear II for the first bottom, the bear III as the second bottom, and the rebound ( the previous bear II rebound) is now become the bull I rise (see fig. 1). So the author is making his first bull call. This change allow the rise to go more extensive for the bull I rise verses the limits for a bear rebound. However, there still is a limit for bull I to rise before its correction which seems to be coming.
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