SSE Composite Index: Is It Ready To Breakout or Crash Again

SSE Composite Index:

SSE Composite Index: Breakout Or Breakdown

The SSE Composite index has put in a lower high as indicated in the picture, and the momentum could change at any point as it appears poised to test its lows again. If 2920 is taken out on a monthly basis, it should lead to a series of new lows before a bottom is in place. At this point, we would avoid committing large funds into the Chinese Markets. However, one can invest in individual stocks or ETF’s that are defying the trend. For example (at least for now), NTES, CQQQ, and TCHEY appear to be holding up well, while BABA is taking a beating but don’t go overboard as the intermediate outlook is still grey.

SSE Composite Index:: boom or bust

Randon Thoughts the Market and the Current Political situation

Until the trend changed in China, we were silent on china, because the trend favoured them and we don’t like to waste time on empty rhetoric. The same line of thought applied to our stance on the precious metals sector. Even though we favour hard money principles we are wise enough to know that it’s fools dream to think anyone in power will allow such thoughts to gain traction. That is why we diverged from Gold in 2011, much to angst of the Gold Bug and Hard money communities; they falsely assumed that our stance from 2003 to 2011 when we were extremely bullish on the sector indicated we were gold bugs.

A Tactical Investor Follows Trends and not whims

We are not Gold bugs, technology bugs or any bug for that matter. We are trend players, and if the trend turned bullish on peanut vendors we would embrace that sector. So from a financial perspective, a Trump win will be bullish for the markets, and that’s the same thing we said back in 2015.

Will he win? That is another story, but the hidden support we are tracking remains unchanged, and that hidden support could be as much as 20%.  As we stated his biggest drawback is his big mouth. If he were to cut back his rhetoric by 50%, his likability would probably rise above that mark. However, it seems an impossible feat; he seems to take a perverse delight in slugging it out. Therefore, even though the show looks wild now; we can quite comfortably state that we are only at the appetiser level.  The stench from this all-out catfight is going to get so bad that a skunk in comparison will smell like a rose.

Random musings on China

Read the full story for it provides many details as to how China thinks big; instead of just spending on the military, they are spending on education and infrastructure as this is what is going to provide them with the ability to dominate in the future.  While many experts complain that China just copies technology, there is a caveat here that has never been explored.

If it is so easy to copy another nation’s technology, then why has no other country done it until China? Japan could have done this, so could have Russia, India, etc.  We are not condoning IP theft, but you can’t just steal and hope to produce something highly technical with no facilities in place. The infrastructure to manufacture that tech needs to be in place.

China and US vying for Semiconductor supremacy

We see AMD benefiting in the short term, but unless they can form an alliance with another chip manufacturer,  there is nothing that prevents TSM from encroaching on AMD’s profit margins by charging more.  While this is possible, in general, this is not how the Chinese do business; they think long term, so they try to give you the best price in the hopes of selling to you forever. It’s a great strategy and one that works very well. However,  as nationalism levels are rising and if the Chinese Government gets a foothold in TSM, things could change.

Therefore the real war is between INTC and TSM, and unless Intel steps up its game or the US government intervenes, TSM appears on track to widen the technology gap even more.   TSM is now the Top Player by Market Cap and chip volume, and when such a milestone is struck, the prior leader has to address the issues that toppled them very quickly.

History is not kind to the former leader; in general, they tend to lose the war. Case in point, Yahoo vs Google, MSFTvs Google in the Browser war, and the list goes on. At one point Internet explorer controlled 90% of the browser market, after they won the battle with Netscape using questionable tactics at best. Nevertheless, MSFT was arrogant, and instead of addressing the shortfalls in IE6, they chose to spend money promoting a faulty product.  Along came chrome and the rest is history; the same storyline could be applied to Yahoo vs Google battle or the Blockbuster vs Netflix war.

A straightforward solution would be for either the US government or some private entity to come and rescue Global foundries and put them back into the 7nm wafer manufacturing game.  At least the relationship AMD had with them was on equal footing; they both needed each other. In TSM’s case, AMD needs them more than they need AMD.

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