China Markets Closed Until Thursday…They’re “On a Boat”

[youtube:http://www.youtube.com/watch?v=k8F3UE9qFsg]

The Dragon Boat Festivals Started in China last night. Well, what is that and why should we care?

It’s an ancient Chinese Holiday that falls on the fifth day of the fifth lunar month. This year it runs from June 13-16th. There are differing legends about the holiday; one is that an official drowned himself when he heard his side lost an important battle. Everyone was so upset that they threw food to the fish so that they wouldn’t touch his body and raced to recover his body in long, narrow boats.

During this week Mainland China will be racing dragon boats and eating Zongzi which is to symbolize the food that was thrown in the water for the fish.

So you are saying, that’s nice but how does it affect my trading and the markets?

Bottom-line, the global markets have been directly affected by how mainland China has been trading for a longtime. Shanghai Comp sells off hard, we normally sell off. Right now that index is in a death cross on their daily chart with a very weak support level.

As you know, Mainland China has three primary markets Shanghai, Shenzhen and Hushen. I have been in long debates on other blogs last summer whether Shanghai reflects China vs. the Shenzhen. I follow Shanghai Comp but that is just a personal choice. That is what I normally blog on too.

The Hang Seng is actually the Hang Seng Indexes which is a wholly -owned subsidiary of Hang Seng Bank, established in 1984 and is Hong Kong’s leading index compiler covering Hong Kong and mainland China markets. It is widely seen as the barometer of the Hong Kong stock market. So not a pure mainland China indicator.

Over the last week the Spot Prices for Iron Ore out of China and India has been moving down even with the USA rally in our equities. The Baltic Dry Index has also been moving down. Steel prices has been weaker and copper, etc in the Shanghai Futures Exchange has been down trending.

Now the question arises is whether we will see a pickup of activity after they return from the Boat Races?

What concerns me is that we didn’t see a huge jump in buying in February when China returned from New Year’s celebrations. That was before the China Government reduced lending by the banks in attempt to reining in the property market and all the speculator loans they created lending to everyone in 2009.

So, Thursday will be important for our markets when they come back to see if we see a start up in activity. The Shanghai Futures Exchange which follows Shanghai Copper, Rubber, Oil, Rebar and other key commodities could be the best “acid test” for demand.

In addition the China Government normally likes to make policy announcements regarding the Yuan when the Markets are on holiday; I believe if the US Government did not push them to tighten they would have taken action this week. Actually, they may still take action in other ways besides raising rates.

Yet, China Daily tonight is reporting that “Faster-than-expected export growth in May is unlikely to prompt the government to have a major rethink of its current policies on trade and the currency.

Yao Jian, spokesman for the Ministry of Commerce, said the “stability” of China’s trading policy is “paramount”, given the murky economic situation in Europe, which is China’s biggest trade partner.

He said robust exports in May were mainly a result of orders booked before the deepening of Europe’s debt crisis.

“In the next few months, the negative impact of Europe’s debt crisis on Chinese exports may gradually show up,” Yao said on Saturday”.

We will see, until then let’s race boats and throw sticky rice into the water… And wait for Wednesday night to see how China trades in the Asian Session.

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