The Trump Effect: China’s Stock Markets Feeling ‘Extreme Pain’

The Trump Effect: China’s Stock Markets Feeling ‘Extreme Pain’

The Trump Effect: China’s Stock Markets Feeling ‘Extreme Pain’


Tuesday’s stock market plunge shocking Chinese investors.

China’s benchmark equity gauge sank almost 5% at one point and by the close, the escalating tensions with the US pushed 1,023 stocks ‘lock limit’ down by 10% on the day, that is 25%+ of the exchange listings.

The Shanghai Composite Index’s (DJSH) slide below 3,000, a level previously breached during market crashes in Ys 2015 and 2016.

Investors are worried a trade war will act as a brake on China’s economy and hammer an already deflating equity market.

Seeing the benchmark DJSH dropping below the 3,000 psych mark hurts sentiment even more. Things could get a lot worse if the trade war escalates and China fights back in an unconventional way.

We do not advise against buying into the selloff.

Tuesday China said it will retaliate “forcefully” after President Donald Trump threatened duties on $200-B in Chinese imports, and another $200-B after that if Beijing retaliates.

It follows last week’s publication of the US’s final list of $50-B in tariffs, and China’s statement over the weekend that all recent agreements on trade would become void.

The Shanghai Composite is among the world’s worst performing benchmarks this year. Almost 80% of the Chinese index’s stocks closed at fresh 4-week lows Tuesday.

While the Shanghai Composite Index now trades at less than 11X projected earnings, its cheapest relative to global shares since early Y 2015, there are few bargain hunters lurking.

It’s too early to call the bottom in Mainland equities.

Investors were surprised that President Trump changed his attitude, they expected a good result after the Singapore Summit and the Chinese government’s favorable monetary policy.

Traders had speculated that China’s so-called national team would be committed to defending the 3,000 mark, which proved to be a Key level of support for stocks at the beginning of last year.

With little sign of state intervention, Bearish sentiment will persist, even as the Shanghai Composite closed at a technical level that may signal it fell too far, too fast, the pain is extreme.

In a trade conflict between the USA and China, the bet is on the USA. China will fade.

Tuesday, the major US stock market indexes finished at: DJIA -287.26 at 24700.21, NAS Comp -21.44 at 7725.60, S&P 500 -11.30 at 2762.33

Volume: Trade on the NYSE came in at 981-M/shares exchanged

  • NAS Comp +11.9% YTD
  • Russell 2000 +10.3% YTD
  • S&P 500 +3.3% YTD
  • DJIA-0.1% YTD

HeffX-LTN’s US Major Stock Market Indexes Technical Analysis

Date Symbol Price Technical Analysis Support Resistance
19 June 2018 QQQ 174.50 Bullish (0.32) 172.94 174.87
19 June 2018 DIA 247.00 Bullish (0.20) 244.78 247.66
19 June 2018 SPY 276.23 Bullish (0.30) 275.27 278.09

America First & MAGA

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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