Confirming Market Bottom with Volume

On the 15th April I report the stock market is bottom out. Three days later I see signs to confirm this view.

Citi Group announce greater than expected loss and AT&T are cutting jobs. However Honeywell and other companies are announcing double digits profit. For the past few days, the stock market has only react to good news and ignore the bads.

** It is as if someone know about the good earnings and are continueing to buy, thus stop the stock market from falling **

The A50 Tracker fund which tracks the China A50 index is behaving oddly. One can see the double bottom acompany by huge volume. This is a very strong market bottom signal.

China is a very primitive market. Inside Trading is a norm. Chinese investors are very indiscreet in their trading. If the Chinese Stock Market is bottom out and someone in China know about it then they will put a lot money in the stock market indiscreetly. These volumes are just that.

Positive Feedback
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China is a positive feedback market. Companies get a big portion of their earning from investment income. When the stock market do well then earning from their investment income increases which in turn boosts the share price and the stock market. When the market fall then the positive feedback drives the market down very quickly. Until some events trigger the end of the cycle. The end of the bull run was triggered by the subprime crisis.

These few days the international stock market is doing well but not the China Stock Market. This is because of there is a very strong positive feedback momentum driving the market down.

The A50 volume shows someone is putting money into the China stock market and this is the trigger to end the bear cycle.