• 401 days Will The ECB Continue To Hike Rates?
  • 401 days Forbes: Aramco Remains Largest Company In The Middle East
  • 403 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 803 days Could Crypto Overtake Traditional Investment?
  • 808 days Americans Still Quitting Jobs At Record Pace
  • 810 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 813 days Is The Dollar Too Strong?
  • 813 days Big Tech Disappoints Investors on Earnings Calls
  • 814 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 816 days China Is Quietly Trying To Distance Itself From Russia
  • 816 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 820 days Crypto Investors Won Big In 2021
  • 820 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 821 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 823 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 824 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 827 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 828 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 828 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 830 days Are NFTs About To Take Over Gaming?
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

Trading On The Mark

Trading On The Mark

Trading On The Mark

Our work is grounded in several technical methods. We make use of Elliott Wave, Gann techniques, Fibonacci relationships in price and time, cycles, and other…

Contact Author

  1. Home
  2. Markets
  3. Other

Look for Trades Now in Chinese and Australian Stocks

With Australia's and China's economies so closely linked, how likely is it that the stock markets in both nations can continue moving in opposite directions? In this article, we draw on excerpts from our recently published e-book to compare the major stock indices of each nation, and we note some factors that suggest both indices are on the verge of reconciling their divergence.

China is Australia's biggest trading partner, with valuation of trade that match the entirety of the island continent's trade with Japan and the United States combined. As with most of China's trading relationships, natural resource feedstocks dominate its imports from Australia, and consumer goods are the largest part of its reciprocal exports. However, despite those close ties, Australia's ASX 200 Index has rallied since 2009 while China's Shanghai Composite Index has declined over the same period.

Looking forward, we believe the big-picture decline in the Shanghai index is likely to continue, with a downward turn due soon. That should correspond with a major downward reversal in the Australia index. This conclusion is based on a combination of Elliott wave analysis and cycles analysis, as described below.

The Shanghai Composite Index, China's broadest equity index, has been declining for several years already. The spectacular crash in the Shanghai Composite in 2007 and 2008 coincided with the decline in stock indices worldwide. Although the Shanghai Composite participated in the global stock rally from late 2008, it failed to keep up with other indices in subsequent years. Instead, it has taken a sideways-down path to visit prices not far from its 2008 low. We believe it has a considerable distance yet to fall.

We admit it was difficult to assign an Elliott wave count to the decline from 2009. There have been several overlapping moves, and many of the sub-moves have a corrective look. Based on recent developments, we believe that price is tracing a downward impulsive [c] wave that began in late 2010. Note in particular how well price has behaved within the modified Schiff channel when it is anchored to the main waves corresponding to that Elliott wave count.

In this interpretation, the Shanghai index currently is pressing against important resistance in the form of the channel midline, and the dominant 44-week cycle in price is on the verge of turning downward.

At this point, we believe price should eventually fall below the 2005 low of 998.23, although we will continue monitoring that assessment during the next 12 to 24 months.

Shanghai Composite - Weekly
Larger Image

The S&P/ASX 200 Index reflects the top 200 stocks in the Australian Securities Exchange. On the monthly time frame, two cycles can be extracted from price data, with lengths of 80 months and 41 months. This summer, both of those cycles have begun moving into their downward phases. Based on cycles alone, we would expect weakness to extend into 2016 or 2017. The shaded areas on the monthly chart below show previous times when both cycles have converged in their downward phases and each instance has coincided with either a retrace or a reversal.

In addition, we see that the Wave59 "nine-five" exhaustion indicator has registered a "5" exhaustion signal recently, coinciding with price having moved into a long-term target area of 5,422 to 5,670, as shown with the crosshatched box on the chart.

Australian ASX 200 - Monthly
Larger Image

Initial confirmation of a downward turn in the ASX 200 would come in the form of a weekly close below the support implied by the center line of the channel on a weekly chart, or approximately 5,520 by late September. The nature of the channel support in that area can be seen in a weekly chart that is available at our website.


Back to homepage

Leave a comment

Leave a comment