China's factory activity shrank for the second month in a row. Economists predicted worse. The country beat expectations by contracting slightly less than anticipated, which is apparently what passes for good news now.
Retail traders saw "less bad than expected" and bought the dip. They treat economic contraction like a participation trophy. Second place in the shrinking competition. Bronze medal in the recession Olympics. They're celebrating because Beijing might panic and print more money, which definitely has no long-term consequences worth considering.
The technical picture could not be clearer. None of this matters. Factory output contracts, expands, stays flat—the chart does not care about your manufacturing index. Support and resistance levels were drawn months ago. They remain exactly where they were before this headline existed. Price will either break through or bounce off, and some guy named Chen working overtime in Shenzhen has precisely zero impact on that outcome.
Beijing faces pressure to support the economy. They'll announce stimulus or they won't. Markets will move or they won't. Retail will claim they predicted it either way. The actual manufacturing data will be revised three times over the next six months until it bears no resemblance to today's number, but by then everyone will be panicking about a different contraction in a different country that also beats expectations by shrinking slightly less.
The momentum is losing momentum, according to people who get paid to say things like that. Growth slows while analysts furrow their brows and update their models, which were wrong last quarter and will be wrong next quarter. None of them are trading their own book.
But sure, let's all pretend this changes your entry at the 200-day moving average.
Photo by Camillo Corsetti Antonini on Unsplash
Leave a Comment