Earlier today we were wondering if the recent volatility in Chinese stocks was a sign that a severe correction was about to occur.
On further investigation, there was another amazing finding.
Here is a chart that tracks the bull market on the Shanghai Composite that begun in 2006. While our starting point, August 7, was not the absolute low of that year, it was the day that the market rally really took off. We then overlaid the rally that began last year using a starting point of July 21. Again, while not the low of the year – that was struck on March 12 – it marked the point when gains began to accelerate.
It is freaky.
The pattern, the day run, the moment when market volatility has hit – they are almost exactly the same, only some nine years apart.
While we freely admit that we have used different scales for the chart, even when you put the movements between the two in percentage terms, as we’ve done below, the similarities are still incredible.
While increased volatility in markets is often a harbinger to a severe trend reversal, if the pattern of 2006 to 2007 was to be repeated on this occasion, the correction of this week would not only fail to stick, but the index would surge to even more dizzying heights.