Is Shanghai a Nasdaq Déjà vu

The rise of NASDAQ in the late 1990’s has been compared to the rise of the Dow of the late 1920’s. Chart overlays are amazingly similar.

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Image from BullandBearWise.com

Well, the current two year rise of the Shanghai Stock Exchange Composite Index looks remarkably similar to the rise of the NASDAQ of the late 1990’s and the charts below explain better than I can!

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The NASDAQ rose from 1,250 to 5,132 from March 1997 to March 2000: 310% gain!
The Shanghai Stock Exchange has moved from 998.23 in June 2005 to 5,552.30 today (10/2/07): 456% gain!

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As you can see, the blue line of the late 1990’s NASDAQ has moved meticulously with the Shanghai Index of today.

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Will the Shanghai Stock Exchange end up with the same result as the NASDAQ of the late 1990’s. As you can see, the NASDAQ went from 1,250 to 5,132 back down to 1,192 (all within a five year period).

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This won’t happen overnight but human nature always repeats so expect a huge decline in the Shanghai Stock Exchange within the next several years.

1929, 1999, 2007, etc…

“Wall Street never changes, the pockets change, the stocks change, but Wall Street never changes, because human nature never changes” – Jesse Livermore.

“The price pattern reminds you that every movement of importance is but a repetition of similar price movements, that just as soon as you familiarize yourself with the actions of the past, you will be able to anticipate and act correctly and profitably upon forthcoming movements” – Jesse Livermore

“All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope – that is why the numerical formations and patterns recur on a constant basis” – Jesse Livermore

Comments

  1. Chris,
    Impressive research. It will be interesting to see how closely Shanghai follow the Nasdaq in the coming year.

  2. Steven Mac says:

    Your posting on the Shanghai/NASDAQ correlation is very interesting and a very timely subject as I see the talking heads keep speaking about a Bubble in the Shanghai Index. More importantly, I like how you point out that these events are repeatable which should clue us in to what the future could bring and also serve as a warning. Some of my thoughts (though I could be reading into this too much) that I find interesting with your analysis is that this breakdown/decline will begin to coincide within the timeframe that an estimated 700,000 Baby Boomers per year in the U.S are expected to begin phasing into retirement. With the trend being oversea fund/index investing for many investors (401K, IRAs Stock & Mutual Fund retirement accounts), it could be within the 2009-2010 period that Institutional leverage will weaken due to retirement money flowing out with this acting as a catalyst or factor to fuel the bust.

    Thanks,
    Steven Mac

  3. Comparison to the late 90s Nasdaq are a bit overblown. China still has a nice run in it. There will be corrections along the way, but it’s still early in the game.

Trackbacks

  1. […] Is Shanghai a Nasdaq Déjà vu […]

  2. […] Mike Steinhardt from HEDGEfolios uploaded a great post today Comparing China’s Stock Market to the NASDAQ of the late 1990’s. As you know, I wrote about the technical comparison on Wednesday in my post titled Is Shanghai a Nasdaq Déjà vu […]

  3. […] that is China, but Chris Perruna raised an interesting point.  The Chinese market is now almost a mirror image of the NASDAQ from the early 2000’s.  […]

  4. […] Is Shanghai a Nasdaq Déjà vu Well, the current two year rise of the Shanghai Stock Exchange Composite Index looks remarkably […]

  5. […] Jesse Livermore says it better than me and he is a big part of the reason why I study chart patterns so intensely. Stock charts organize human behavior in patterns that allow us to anticipate future moves based on past results. Based on this assumption, I wrote a post last October titled: Is Shanghai a Nasdaq Déjà vu […]

  6. […] Is Shanghai a Nasdaq Déjà vu Well, the current two year rise of the Shanghai Stock Exchange Composite Index looks remarkably […]

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