Shanghai Socionomics

It’s about a month ago in “Oiling the Wheels for China” that we expressed some short term concerns in respect of China’s main stock-index, the Shanghai Composite, commenting that whilst the index remained above the moving average (s) shown, which is bullish, it was looking somewhat stretched against the 200-day, at 20% above it. We also observed an interesting negative-correlation between the SH Comp and the Oil price, better observed by showing the crude oil price inverted, going onto to suggest that if the oil price was ready for a bounce, it would likely be accompanied by a correction for the SH Comp.

Fast forward to date and the oil price has eased by a further $3, to $50 a barrel, whilst the SH Comp has added a further 10%, stretching it to 32% above its 200-day MA.

We still have concerns

27 March 2015 Blog 1

Although the Shanghai stock-index has continued its good run of late, if we compare it to new share accounts opened, as seen above, a surge in accounts appears to accompany a temporary peak for the index. Either way, of perhaps more interest is the Socionomic observation that investors’ do not buy low and sell high, as per the popular myth, but subconsciously herd, selling as prices fall and buying as prices rise.

Perhaps a useful contrarian indicator?

 

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3 responses to this post.

  1. […] week we provided Socionomic evidence that that investors’ do not buy low and sell high, as per the popular myth, but […]

    Reply

  2. […] recent posts, “Oiling the Wheels for China” and “Shanghai Socionomics,”expressed concerns over its main stock-index, the Shanghai Composite, observing that it was […]

    Reply

  3. […] may wish to visit our end March post, called “Shanghai Socionomics” which made other interesting observations, including a warning on Chinese […]

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