Shanghai Composite Five Wave Count - Alfred E. Neuman Still Has The Microphone

Plenty of Alfred E. Neumans over the last few weeks stating the U.S. economy has turned the corner. Plenty more Alfred E. Neumans at the last G20 tea sipping party telling us the global economy has turned the corner. When in the annals of history have politicians, keepers of the status quo, ever correctly called a turn in the future of an economy? Or realized the world has permanently shifted beneath them? Those are rhetorical questions because the answer is clearly never. Not to discount the ability of many politicians in attendance. They just don't have the ability to wave wands and make all of their prior mistakes go away.

Plenty of Alfred E. Neumans over the last few months telling us the Chinese economy has turned the corner as well. Above is a chart of the Shanghai Composite. The index may be in the process of completing a typical counter trend five wave rally off of its October lows. If this pattern does develop, the minimum downside target for the Shanghai Composite would be a retest of the October low. Should that low be broken, the next downside target would be about 1150 or about a 50% fall from here. The pattern has completed itself at last Thursday's price level but time could play a role in extending a topping process. Or we could see a new price and time level develop before the pattern resolves itself. In other words, pattern recognition is not a trading tool and is art more than science so we shall see what happens in coming weeks and months.

Because governments have been spending like drunken sailors to stave off a depression, the world has yet to reveal its true self. It will in due time. In the mean time the Alfred E. Neumans of the world are still getting plenty of press because there appears to be some apparent uncertainty as to whether politicians and central bankers can save the world economy. The key word is apparent. In this case apparent is quite apparently useless.

Don't lose site of the fact that one of our main theses has always been the largest messes in the global economy will develop outside of the United States. And the largest mess is almost certainly China - depression dead ahead. On that note, its leaders continue to do everything possible to ensure a worst case outcome. (American politicians, regardless of party affiliation, aren't far behind.) That should not be surprising to any long time readers- Alfred E. Neuman has taken up permanent residence in China.

For those who have been with me over the last four year calendar years, none of the anticipated outcomes we have written of have changed. In other words, the future is going to be substantially more interesting than anything seen to date. In the mean time there seems to be no shortage of Mad Magazine cover shots be it world leaders or Wall Street pundits.