Monthly Intraday Charts for SPY and SSEC: 2010-12

This is a monthly series of intra-day charts for S&P 500 (SPX) and Shanghai Index (SSEC)

SPX

SSEC

Netflix (NFLX) chart analysis

Similar to BIDU, NFLX experienced an enormous run-up in the last 20 months.  The chart below illustrates possible timing and price level scenario of this round of correction.

Below is a close up of NFLX chart with shorter time frame

Baidu (BIDU) chart update

This is an imaginative scenario of BIDU's next 3 months price action. BIDU's recently formed downtrend (red line) meets the primary up trend line (pink) at 38.2% Fibonacci retracement level at $75 in mid-March which in this scenario is the price target of this round of correction.

Hang Seng Index (HSI), Xinhua China 25 ETF (FXI) and Shanghai (SSEC) chart analysis

FXI is right now sitting on a 20 month trend line at $42.67

Actually FXI tracks Hang Seng Index (HSI) pretty well, so you can analyze HSI to understand FXI.  The chart below doesn't reflect most recent price move of HSI to 22900 level which is around 38.2% retracement level of its most recent rally.  However, HSI still has room to drop to reach its 20 month up trend line as FXI did today.  It's at 22555 level which is 1.5% - 2% lower than current level.

After my last post, Shanghai index has broken the resistance at 2850 level from the recent consolidation at, this bodes well for FXI and Hang Seng.  It is now going back to retest the 2850 level as support.

Cisco (CSCO) chart analysis

Cisco (CSCO) rallied 104% in 413 days from March 2009 to April 2010, then in 222 days it corrected to 38.2% Fibonacci level of its previous rally at $19 in early December, see chart below:

Using history as reference, CSCO rallied from $8 to $29 in 479 days from Oct. 2002 to Jan. 2004, then it also corrected to 38.2% Fibonacci level of that rally at $16.83 before it spent another 400 days to more than double its price to $34.  If history will repeat itself, CSCO has reached bottom of its bull market correction and will reach $38 in early 2012.  These are very bold and you can say imaginative predictions, please don't base your decision on them, but rather focus on day-to-day price action.

Baidu (BIDU) chart update

BIDU price gained over 1000% in 700 days from Dec 2008 to Nov 2010, then after about 2 months of consolidation, it is resolving to the downside.  The chart below was as of 12pm today, it shows that Baidu (BIDU) dipped below the 2 month upward support line (blue dash line). 2 additional up trend lines will provide potential support in the near and intermediate future: the red line at around $95 as of now, if red line is taken out by sellers, the green line will provide support at around $70. 

If we look at Google (GOOG) between 2004 and 2006, another leading search engine stock, its price increased almost 400% from August 2004 to Jan 2006, then it corrected 30% in a matter of 1.5 months before resuming its up trend.  The correction brought GOOG back to the blue trend line which increases $50 every 3.5 months.  In comparison, BIDU's green trend line increases $10 every 3.5 months, and its red trend line increases $10 every 2 months. 

To provide longer term reference using GOOG's history, the chart below shows GOOG's price between Jan 2006 and Dec 2007.  After the 30% correction, GOOG price spent another 400 days moving up along its blue trend line before the final leg up from Aug 2007 to Nov 2007 which deviated from the blue trend line.

GOOG's price between Aug 2004 and Aug. 2007

So using GOOG's history as a reference, BIDU's recent peak is not the end of its bull run, but rather an intermediate one.  So the question is which trend line will hold in this correction?  If the red trend line will hold, it means that when the correction is over, BIDU price will increase $60 to at least $155 level in a year which is not entirely impossible.  However, BIDU's P/E ratio is kind of high at 83.  GOOG's early 2006 correction marked the start of GOOG's P/E ratio drop, before the correction it's at 96, 12 months after, it's in 30's.  If we expect the similar things to happen on BIDU, then the more likely trend line to hold is the green one rather than the red one.  But the on-going price actions should be focused on as the major clue.

Update: Ouch, BIDU closed today at $100.19, it dropped over 5% in 4 hours of afternoon trading.

Shanghai Index (SSEC) chart analysis

Since the early July low, Shanghai index rallied ~800 points or 33% and then corrected ~400 points in matter of 5 months.  The index has spent last week consolidating in the tip of triangle shown in the chart below.

Interestingly, SSEC experienced almost identical rally and correction from Nov 2008 to March 2009, 800 points rally followed by 400 points correction.  If history repeats itself, we should expect upside breakout in very short term, and an 1400 points rally will ensue.  However, don't jump to that conclusion quickly, as the situation are quite different between March 2009 and now.  In March 2009, the S&P 500 was at 667, NASDAQ was at 1268, VIX index was at 50 level; right now, S&P is more than 80% higher, NASDAQ more than 100% higher, and VIX index is at 18 level. 

Investment community likes to take Shanghai Index as leading indicator nowadays, however, it's likely that Shanghai could take US stock market as leading indicator as well.  So it's possible that history will repeat itself, but I would be very cautious to long equities right now.