One of our SpikeTrade members has sent in his second letter about China. It is posted here without editing – AlexCurrent Myth:

1. China has $1.1 trillion of foreign reserve, they are strong financial sound country.
   

I didn’t know the BDI and added it immediately to my weekly check list. Thank you.Rodryk’s last post on the BDI which was instructive for me. Now, we can see that it has been going down for 3 weeks while the markets have been going up for exactly the same period.I wondered whether the shipping industry could be used as an indicator of a possible recovery of the markets. I compared both the MG776 (index of the US shipping companies) and the BDI as of 2009-03-26. Unfortunately, MG776 follows the main indexes and hit its lows at the same time although the weekly MACD remained very positive. It didn’t bring us any new information compared to the BDI which was up since the second week of December while the markets tumbled as Rodryk pointed it out.Didier

This index has been popping up in SpikeTrade discussions, and is a part of my daily homework. This is why I want to share with you this email from a friend, Yannis R, a trader in Paris:“I have read a lot of things about the Baltic Freight Index and I would like to put things in their right perspective. There is a widespread need to identify leading signals for economic recovery. The paradox is that people involved with the shipping industry try to find signs on what their industry will do by analyzing the economy. The rest try to see what the BDI does as a signal for economic recovery!!! This is very dangerous for outsiders as the mechanics of shipping are complicated. I am in the industry 20 years and claim to know 30% of it. So for the latest developments let me lay out the following:1. During the downturn a lot of ships and especially the big ones (Capesizes) were laid up. These were around 400 ships. That’s a lot and not counting the ships slow steaming as to win time.2. These ships now are reactivating and see what is happening to BDI..!3. On top we have the huge order book of new buildings. Even with the reported cancellations their size is 46% of existing tonnage due for delivery this year and next.4. When demand returns to normal levels in the economies, shipping will still have to fight its own demons that were created during the greed years.***** after receiving this email, I sent Yannis the following message ***************************************** he responded: *****************************Regarding DRYS I have to say I am biased so I might not be able to guide you accordingly.

• Firstly I do not trust the guy who runs it.
• During the drop he sold 10 ships from his private company to Drys .
• Drys paid top money for them even though the market had dropped 50%.
• I think the deal never went through goes of public outcry.
• During the 90’s and the junk bond craziness he got 150 million from investors and bought bonds back at 30 cents..!!!
• As I said the fundamentals of shipping for the next couple of years are not looking good because of the new buildings coming in and the low expectations for economic growth.
• DRYS has a huge
  

Hsin had created and sold two computer businesses in Taiwan. He now lives in the US but often travels to China on business. He is an active Spike Member and graduated from a Traders’ Camp in January 2009. I am posting his letter without any editing – Alex

1. Gray Economy is unique in China … so most convention economy study for China is not working well.
2. Unlike western world which this time economy crisis affect majority of people, only 1/3 of population in China get affected.
3. China has no debt and lots of reserve … under one party management, decision is faster and enforceable.
4. Most Chinese don’t have debt… most housing value are way above their mortgage, no sub-prime or major credit problem.

Cash flow is tight for SME … but China ‘underground banking’ is at least 200% – 500% more than ‘normal banking’ activities.Question area:

1. The next 3 months will tell us ‘how much China economy tie into Export’?
2. Can China increase domestic consumption is key to its long term success.

Conclusion:

1. China, compare with others, has least problem on hand.
2. China equity market don’t support ‘SHORT’, most people are ‘buy and hold’ type. Most people lost 60% in equity market and
3. Still hold on to it
   

I would like to share a part of my week-end “market bottom homework” with you, Spikers and SpikeTrade Members via the blog.Please find attached a monthly chart of the S&P500, including embedded comments. – As I am abroad in Denmark and did not want to update “tons of data” with TC2007 (->roaming costs), I used this time Incrediblecharts.com, which downloads the data on a stock by stock basis.

Many thanks to Vladimir for this latest update – he has plotted weekly and daily New High – New Low for the European Stoxx 600 Index. The chart seems to indicate that in a bear market whenever the NH-NL rises above 0, a price break soon follows. At this point NH-NL is hovering just below zero. – AE

Jean G, a Spiketrade member, writes – DJTA weekly has formed a perfect Morning Doji Star; a long bearish candle on the week ending Jan 23, a Doji the week after and a long bullish candle last week. The Doji is also an inverted hammer confirmed by the last week bullish candle. Also noteworthy is the small gap between the close (2965.89) on Jan 23 and the open (2964.24) on Jan 26. This gap is rare for an index but desirable for a Morning Star.The Morning Doji Star is a strong bullish signal.