The Slog studies the timelines involved in the Shanghai composite’s overnight rally…and proves it had nothing to do with Western rallies. While the West is selling it as ‘problem hyped, now solved’, Chinese insiders are confident that the PBOC bought itself some breathing space – and nothing more.

OK, now pay attention: this is how the global bourse ‘system’ works. As we’ve known ever since the days of McDoom being Chancellor and then Top Turkey in the UK, its a globalglobalglobalglobal world and that’s the future so accept it.

But I posted yesterday about how when something goes bum over nose in China, then it’s a distant problem and nothing to do with us. Thus proving perhaps that it isn’t a global world after all.

As you can see from yesterday’s NYSE performance, the wise owls on Wall Street said (after panicking the day before) “This does not affect us in any way so we’re going to pull ourselves together”. Which is what they did. Mission accomplished. So obviously they agree with me…when it suits them.

Now when all the NYSE gains were in and guaranteed after the close, it was still only 5am in Shanghai. The Shanghai Composite has two sessions – in local time, 9.30 am – 11.30 am; and then in the afternoon, 1pm – 3pm. Shanghai is 12 hours ahead of New York. So when Shanghai went to work, everyone there knew the Western markets had done well. This is how the Shanghai reacted:

shang1 27815It opens, drops, rallies, then drops (testing the all-time recent low) then rallies, and is saved by the bell. More intriguing is what happens after lunch:

shang2 27815By 1pm, the index is even less impressed with the West’s steadier hand than it was: it plunges straight through the low tester….and then suddenly (at 7.30 am CET, when it’s 1.30 am in New York and even they are asleep) it leaps up to finish the day 5.3% up. As there is no correlation at all here between that swift change of heart and events in the west, then it isn’t a global world and China doesn’t GAF about the US or the EU. QED, if you’ll pardon the pun.

Which is preposterous, because of course it does: these are its trading partners, for crying out loud: and you can already see that, as the West’s today unfolds, the tune is changing to “nothing to worry about because China has settled down”. China has nothing to do with us when it’s in the mire, but reassures us when it’s in recovery mode.

That’s how the global bourse system works, see? Clear as mud.

But just so we’re really clear about this: every last net point gained by the Shanghai index overnight was achieved in the last 65 minutes of trading.

This morning all the business sites are giving us ‘Shanghai recovers after Western markets rally’. And CNBC is telling us that ‘Dax opens strongly in light of China rally’. The usual ‘heads we win and tails they lose’ coin flip scam. But none of that reflects what really happened.

Somebody or something provided a huge buy signal. Foreign manipulation? Highly unlikely – only a tiny number of fang wois are allowed to trade on it. You have at least think about pointing a finger at the PBOC…that is, the Beijing politburo. And that’s certainly what the local experts think:

“It looks like the government intervened in the market during the last moments, so it’s hard to claim that the market has stabilised,” said Fu Xuejun, a strategist at Huarong Securities.”

This problem, as the Americans say, is so not over. Hang on to these key conclusions in order avoid further concussion:

  1. Wall Street blames China when things go badly, but insists that it cannot do damage to US markets and yet it’s a global world.
  2. However, China’s trade index with both the US and EU is 21%, so of course it does matter if China implodes: and China is imploding but it is being hidden by Politburo censorship, draconian regulation of all selling and POBC direct intervention to buy anything that falls.

Thus, you can no more trust the Shanghai as an indicator when it rallies than you can trust the Western bourses when they go up.

IABATO! – It’s all bollocks, and that’s official.


  1. If you look at the history of collapsing bubble markets the most common factor in all such events is that the pool of greater fools runs dry.

    I saw on TV the poor Chinese ‘mom and pop’ investors staring bleakly into their trading screens realising that they’d lost their shirts. You can be assured they won’t be fooled again, not that they have any more money to lose anyway.

    Of course one bankrupt investor serves as a warning to 5 friends and soon enough you run out of people to fleece.

    Even intelligent people can fall victim to these things, Isaac Newton lost a great deal of his wealth in the South Sea bubble – the allure of that ‘sure thing’ is very strong.


  2. JW i saw the connection between the two bourses as a continuation of the chinese attempt to learn from the west. so wall street throws the kitchen sink at the market using central banks under its thumb, to force a rally to happen.. next day after it has no affect on china the politburo said do what the usa is doing and dance with them… each is playing to its own audience.


  3. ‘the allure of that ‘sure thing’ is very strong’
    Yes indeed, my rule of thumb is: If it sounds too good to be true, then it most likely is, too good to be true and leave well alone.


  4. Outright manipulation in a rigged game, where’s the mystery?
    All the markets are up nicely including oil and gold, game on, business as usual.
    The can has been well and truly kicked down the road for another day.


  5. How very convenient…

    A New Computer Glitch is Rocking the Mutual Fund Industry
    Outage is preventing dozens of mutual funds, ETFs from promptly pricing their securities.
    A computer glitch is preventing hundreds of mutual and exchange-traded funds from providing investors with the values of their holdings, complicating trading in some of the most widely held investments.


  6. there’s a lot to be said in investments you can touch and control,not giving your dosh to a bloke who wins even if you lose.I’ll stick to what I know


  7. The Earth’s daily rotation and the Moon’s gravity results in two high tides every 25 hours or so. That is far easier to explain than the highs and lows in stock markets around the world each 24 hours. I have been trying to make sense of it for decades.


  8. Completely off this topic but, in keeping with the general theme of this blog I feel.
    ‘UK Orders Google To ‘Forget’ News Articles Discussing Previous Right To Be Forgotten Requests’
    ‘We knew this day was coming. Ever since the EU decided something called the “right to be forgotten” existed, and that Google (mainly) would be tasked with the “forgetting,” the descent into an Inception-esque state of forgetting about forgetting about the forgotten was the illogical next step forward.’


  9. David Stockman is correct. The algos are about to be changed from ‘buy the dips’ to ‘sell the rips’. Expect a week to 10 day rally here perhaps close to the 50 day EMA on the S&P and then the selling starts. we are dealing with the second XI here. After Tuesday week (day after Labour Day) the First XI are back in the US and Europe and the bear market can get its real legs.


  10. And this in the Indie..
    Stock up on canned food for stock market crash, warns former Gordon Brown adviser
    A former adviser to Gordon Brown has urged people to stock up on canned goods and bottled water as stock markets around the world slide.

    Damian McBride appeared to suggest that the stock market dip could lead to civil disorder or other situations where it would be unreasonable for someone to leave the house.


  11. We are quite definitely circling the plughole Kentucky…

    When the lights go out I’ll not be able to say it, so in advance – thanks for all the good discussion.
    JW – you’ve done a lot of good and pushed a lot of people out of their complacent mindsets so well done sir.


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