Is the Shanghai Index impervious to the PMI miss?
With Chinese PMI data underwhelming at 50.4 vs circa 52 exp, doomers are enjoying spontaneous beargasms across the social media space.
Why then is the Shanghai market holding up in the face of considerable weakness across indices in US, Germany and UK?
The reason is that with such a large proportion of the population in China exposed to manufacturing of one type or another there is a very clear understanding of expectations for future earnings. This is why the Shanghai Composite underperformed as the western indices ran higher on the QE crack so now it is only reasonable that the bears on bath salts should be eating bull’s faces. In this recent post I covered how information is deseminated in China Is the Shanghai Index telling us something?
This image below is a POST China PMI chart showing the steady basing pattern continuing unabated. This is a good sign!
Near term though may well see even bigger bears on bath salts roaming the markets.
HOWEVER. the trajectory of the Chinese market suggests someone, somewhere is cleaning their bear cannon and the Chinese know the amount of ammo on order. Let’s face it, the ammo production was probably outsourced to them.
For context on how much fear and margin heat folks are taking right now, check out the FinViz 1 Day relative futures performance. “If you can’t eat it, dump it” right?
Cool heads always prevail in times like this and given weekly price candles have been driving the real market direction for months if not years now, just wait for a close to print that you are happy with. Missing a % or two to ensure you are actually going to see the next 20% seems a cost worth paying.
Enjoy the Normal Friday Perjury from the Bureau of Labor Stats later today.
Have a great weekend!