China Says Buy! Should You Listen?

Stocks are having their biggest 2-day surge since January 28th and 29th. That would be a much cooler fact if January 29th hadn’t been followed immediately by a 7% plunge.

All of this happened just over the last few days, for those of you kind of spacing out on the markets at this point. Perhaps a picture will help:

 

In case you’re new to this, it’s neither normal nor traditionally healthy for stocks to spike and drop 7% in less than 3 weeks of trading. For the S&P 500, 140 index points (I will not use “handles”) is more than a trillion dollars in market cap. That seems hard to justify on a fundamental basis.

When the S&P 500 is getting revalued by more than a trillion dollars every 10 days it’s best to sit back and wait, in my experience. We’ve already gapped into resistance. So you’ve got a ceiling up head and support way below current levels. The risk/ reward blows.

Another concerning omen: The Chinese have declared the Bull back in charge:

That’s from my favorite government mouthpiece Twitter follow, @XHNews.

The Chinese are exceptionally bad propagandists. Unfortunately their record with stock calls isn’t great, either.

Here’s XHNews’ call from last July (from Jan 21st column):

 

I’ll be selling rallies until further notice. Resistance for this one is 1895 (62% retracement) and 1950 (January 29th capstone).

I suspect the Chinese are just a little sheepish about this being the worst Year of the Monkey since 1932. Also, the whole naked currency manipulation, Shanghai Comp Crash, and GDP data tomfoolery. Regarding the last, this is still the best Chinese market cartoon of the year:

 

 

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