FN: The highlighted area is the "stupid zone". Over a three year period between 2006 and the end of 2008, copper went parabolic several times before finally breaking down. Copper has now rallied back to the underside of the "stupid zone". Resistance should be significant.
Note: Real Estate is one of the largest sources of demand for copper.
FN: I couldn't agree more. The Chinese economy is swamped with overcapacity. Overcapacity was already a problem in 2007 BEFORE the world economy imploded. Now with exports cut in half and not likely to recover for many many years, the number of idle factories, equipment and people are at critical levels.
China’s Market ‘Should Be 2000 or Less,’ Xie Says (Update1): "China’s economy isn’t “sustainable” and the Shanghai Composite Index, now at 2667.75, “should be 2000 or less,” former Morgan Stanley Asian economist Andy Xie said in an interview.
Xie, who correctly predicted in April 2007 China’s equities would tumble, told Bloomberg Television that the stock market remains “in bubble territory.”
China’s stocks plunged today, with the Shanghai index falling the most since June 2008 and entering a bear market, on concern a slowdown in lending growth may derail a recovery in the world’s third-largest economy.
The Shanghai gauge slumped 22 percent this month as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity.
The decline stopped a rally that had sent the measure up 103 percent from a November low on prospects the government’s 4 trillion yuan ($586 billion) stimulus program and a record amount of new loans will ensure the economy grows at least 8 percent this year."
FN: The Chinese growth miracle has morphed into an easy credit mirage. After both credit creation and stock prices went parabolic the last two months, Chinese authorities ordered their banks to "tighten". Since most of the credit was flowing straight into stocks, the bid disappeared.
China’s Stocks Slump Most Since June 2008, Cap Monthly Loss: "China’s stocks plunged, with the Shanghai Composite Index falling the most since June 2008 and entering a bear market, on concern a slowdown in lending growth may derail a recovery in the world’s third-largest economy.
The benchmark index tumbled 6.7 percent to 2,667.75, capping its biggest monthly loss since October. The gauge has slumped 23 percent from its 15-month high on Aug. 4 and is the worst performer this month among 89 benchmark indexes tracked by Bloomberg globally.
“The local market bears are convinced that tightening is already underway,” said Howard Wang, head of the Greater China team at JF Asset Management, which oversees $50 billion. Only “a very strong set of macro numbers in August” or “stronger statements from central authorities” would change this trend, Wang said.
At least 150 stocks on the 898-member index dropped by the daily 10 percent limit. Industrial Bank Co. and Aluminum Corp. of China Ltd. tumbled by the permitted cap after Caijing magazine reported new loan growth this month may be almost half that of July. Lower profits dragged Baoshan Iron & Steel Co., the nation’s biggest steelmaker, and China Southern Airlines Co. down at least 7 percent."
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