Forbes: Do Not Buy The China Stock Market Until Next Spring

The Chinese stock market is likely to bottom in the spring of 2019.

The Shanghai market has been in the news. First, politics have attracted the attention of investors  worldwide. The question of trade sanctions has coincided with market turbulence. We still do not know what the eventual outcome will be. President Trump has used his statements and positions as bargaining chips in the past, so the ¡®trade war¡¯ could end at anytime. The question of intellectual property and the military developments in the South China Sea still hang over this market.

The index is at the bottom of our relative strength rankings of world markets, having fallen 14% in 2018. What clues can cycles provide to investors as to when the bear market may end? First, we examine the current condition of the average.

As most experienced analysts and investors know, relative strength is very important. Relative price will frequently reverse before absolute price does. In fact, experience demonstrates that a basing period of at least six months usually precedes a sustained move up. That is, the relative price must not make a new low over a six-month period. Below, we see the relative performance of the Shanghai Shenzhen CSI 300 Index  versus the S&P 500 in the third strip. The relative strength peaked in 2008 and has been declining since. Also, note that the momentum measure in the second strip reveals that this index has not even become oversold yet.