Mainland stocks esp those in HK are under stress.

Why？

##  Valuations are based on interest rates and yield curve.

US is adamant about pushing up rates and QE tapering.

While Mainland is about easing, a reverse policy initiative, this will affect Yuan exchange rates likely depreciating in the medium term.

## Recently omicron is impacting at least two key cities in Mainland, these two cities in fact are among the big four 北上廣深.  Undoubtedly this will impact logistics, supply chain and thus manufacturing therefore affecting exports.

With interest rates moving up in US, the investment circle is discounting internet and IT stocks valuation steeply, this is going to impact HSI as many of its key constituents are internet stocks.

The omicron effect will put off investment in stocks based on internal demand such as automobile, property and food processing etc sectors.

Downward pressure based on lower valuations (medium term), lower exports (at least for the short term), shrinking internal consumption and investment isn't going to give HSI a rally nor A shares one too.

The best to hope for is range trading, but range is moving lower and lower.

If you look at the futures chart and CBBC volume spread of strikes, today's futures daily movements motive seems to clear the Bear contracts.

Is this an indication that the index is going to move much lower, we'll see soon.

My hunch is this possibility is highly likely.

Recently many finance or stock market commentators are saying the up gap around 20100 once filled, the market ie HSI will rebound.

I'm not so positive.

20500/600 is the very long term uptrend support (read my update on Mar 12), once broken,  stayed below for 3 days and unable to recover, HSI could be in for a long term decline.

On Mar 16, the third day it's broken, HSI suddenly recovered well above.

We better not try another brief fall below 20500/600.

Tomorrow is the third day after breaking the support at 20500/600.

If HSI can't recover at least close to this level, the low of 18200 is likely to be challenged in the not too distant future.

Given the earlier indication that 18200 should be a short term low as the event is more regional at the time, then when it does retry the low of 182, it's more likely to be a global event ie all markets fall in sync.

发布者: @make-money-just-for-coffee

The Fed balance sheet shrinking will have big impact on overseas markets then the US market.

Imagine only a few months ago, market is getting 100b new money and now it's shrinking by 95+b.

The difference 6-7 months ago is almost 200b of money lost in the market.

This will impact stock markets badly.

 

This 10y minus 2y Treasury chart hit zero briefly this month.

If it continues to stay below zero for a few weeks, a market contraction will surely follow.

 

@make-money-just-for-coffee 

very reasonable 

Miraculously, today at noon the market is back up to 20500/600 level, if it closes above this level and stayed above for three days or more, it would have recovered to the trend line.

Looks like market players are reading this blog on the three days limit I listed and purposely made it four days 😅.

Let's hope that it won't just stay four days above trend line and fell back below again.

Thanks for your professional advice! 😍 

Hope the advice can help you to have better predictions on your stocks. Do you invest in US stocks as well?

HSI unlikely to recover above 205/6 today.

Let's see if I'm wrong.

The persistent attempts below 205/6 isn't a good sign.

Today is the third attempt below the long term support level.

This indicates not enough buying support.

206/212 will later become a hard resistance if HSI can't recover above 206 in the following few days

Let's go back to Dow

I have reiterated that 95b tapering will hurt, but Fed has attempted to delay the impact so corporations can adjust their positions.

Stock market is going to price in this impact sooner than people expect.

Also corporations who borrowed a lot aren't so easy to adjust in a few months time before 95b tapering is in full

If you borrowed so much, how can you shrink your debt without shrinking your assets, likely selling now at distressed prices, which means shrinking your biz and revenue too.

Tapering starts next month at half the size for 3 months before full impact.

While everything seems so unpredictable, something seems more predictable - 

The 10yr Treasury rate.

Back in 2018, we have T bond 10yr at 3+% but only briefly, how long is that then, from Sept to Nov.

Given we are much more leveraged now than 2018, the economy US and global are unlikely able to withstand such rates.

Brace for more falls in the stock market.

BTW, you can check the rates using data in the app FRED, a Fed based database app.

The stock markets are in a state of flux.

Readily unpredictable but very likely going south mid term.

So let's discuss something else.

Most economic theory in the past are focus on two area of economics - the Keynesian theory and monetary theory.

Both are centered around one thing - rational behavior.

But US has pushed the theories to the limits by borrowing endlessly, printing money at will.

Once you get to such a state, everything you wish may not work as planned.

Also in the course of such happenings, two unresearched areas are also limiting their reactions to what's working against their will - aging and a war between two superpowers plus EU involving in the war.

The war complicates everything.

Aging factor is another under researched area on what economic policies will impact or being impacted.

Thus investing in this very special era of conflicts between big nations and nuclear superpowers will be exceptionally difficult.

Why people are so interested to open borders？

HK is a special case as the place is small, people travel elsewhere during holidays or vacation.

The one important reason is the velocity of money spent.

GDP isn't solely consumption alone even if a big part comes from internal demand.

Tourists spend more money in a short period than locals.

GDP is Vm x Qty, the faster it circulates, the more GDP created.

If the place holds a lot of attraction, outgoing tourists is a small percentage of incoming tourists.

Take places like London, Paris, NY and Venice, they have a lot of special attractions not found elsewhere and people like to try out new stuff.

This becomes all the more important to open borders to outsiders.

If you use ETNet app there's a stock screener which can be tailored to certain specifications, this makes it easier to check out the stocks.

Take tech index, use screener to select tech index, mkt cap at 100,000M which is 1000億 then you can easily check out the stocks to have a feel of where tech index is heading.

You can do so similarly for HSI at 300,000M, real estate stocks (incl Mainland real estate stocks 内房) at 30,000M

This way you can easily have a feel of the sector performance and check out the key stocks, ignoring smaller stocks.

Closing the gap down on 5/6   is very important for HSI.

There are two gaps on 5/6 5/7, the latter one has been filled while the 203-207 gap is still outstanding.

Failing which HSI will see a medium term decline of unknown magnitude as it has fallen off a long term rising trend.

We are likely to breach 21000 very soon since turnover is rising with an hike in the index which isn't the case in the past.

The first resistance is at the previous high and so forth.

But it wouldn't be a straight line, it's likely a bumpy ride as too much losses have occurred from the fall of a recent peak of 25000.