Today is so far one of the most boring sessions in the US this year. Most indices are trading around
the zero line and volatility indices are rather flat.
We have been outlining the arguments of the extreme speculation in China that is nothing but a
“created” false bull in equities. As we have shown over past weeks, the speculation has driven
volumes and margin trading to extreme levels.
Despite a huge inflow of money into Chinese markets, surging volumes, some of the more risker
“satellites” of the Chinese markets, are not really showing what you would expect.
ChiNext is according to us, the epicentre of the Chinese retail speculator.
ChiNext is the winner in China, but note the distribution of the volume compared to price. Max
volume has occurred during this last spike higher. We are fairly confident the less informed
“investors” have jumped on the long train during this last frenzy.
The chart below shows the ChiNext since recent highs, only a few days ago. The index is down by 8%
since Tuesday’s highs, wiping out most of the late rally. If this starts breaking lower, the exit might
prove very narrow for the average Joe.
The below chart is a perfect downtrend, not really what you want to see as a quick long speculator.
Source, charts by Bloomberg