Wednesday, May 30, 2007


Chinese Shares Plunge 6.5 PercentWednesday

May 30, 7:05 am ET

Chinese Shares Plunge After Government Raises Trading Tax to Cool Market Boom

The declines came after the Finance Ministry tripled the "stamp tax" on stock trades from 0.1 percent to 0.3 percent, effective Wednesday. The ministry was trying to "cool (the) stock market," the official Xinhua News Agency said.

You can bet this will have all kinds of negative affects on EVERYTHING today...and probably for all the wrong reasons as well. I'll tell you this, if I were a Chinese and I had made me a pile 'o yuan in that stock market, I'd be buying me some cheap Gold and Silver with the profits.

In regards to this " stamp tax increase" it should be noted:

The stamp tax was set at 0.6 percent when it was introduced in the early 1990s but has been cut repeatedly to encourage the Chinese public to invest in stocks. It fell to 0.1 percent in 2005.

Any fall in the Chinese Stock Market should have little if any effect on their economy and it's commodity demands:

Economists say a fall in the markets should have little impact on China's economy, because growth is driven by exports. Also, households have much more money in savings than in shares.

A fall in prices of even 20 percent is likely to have only a modest economic impact, J.P. Morgan economist Frank Gong said in a report to clients.

Gong noted that during a long bear market in 2001-2005, when the main market index fell from 2,300 to under 1,000 points, China's economy grew by about 10 percent per year.

The World Bank, in a report Wednesday, raised its forecast of China's economic growth this year to 10.4 percent, up from 9.6 percent, and said its current account surplus could reach $340 billion.


Silver had a real nice pop yesterday, as did Gold. However a dump in OIL prices clipped both metals wings. Oh my, Nigeria inaugurated their new president...hey let's sell some oil contracts. Never mind the world supply vs demand issues and the annual summer increase in the price of crude. we'll here Oil is down because of "speculation" that China will use less because their stock market went down...I think we covered why that is hooey above. The Chinese stock market is what is too hot for the Chinese Government, not their economy...It WILL keep chugging along.

But I digress...SILVER! Very nice move yesterday, unfortunately the volume was a little light for a downtrend line break, but a break of the line we have gotten. A close above 13.03 and a bullish MACD crossover...things are looking up! The 20 day Moving Average was pierced intraday, but we were stopped in our tracks by the first Fibonacci line of resistance at 13.19. Stochastic continues it's slow accent...never mind that it looks like the Wright Brothers first flight. It is important now that we have regained 13.03 to hold it. Yesterdays move in the Euro definitely put some fear in dem Rat Bastids and they appear to have covered a lot of shorts yesterday. The light volume indicates that's about all we had moving Silver yesterday...the real buyers are still waiting and watching...soon many will feel like they are being left at the station as this train gathers some momo. June to September contract rollover antics should abate by Thursday. Unfortunately the Euro has given back everything it gained yesterday morning...somebody in the EU does not want the Euro back over 1.35.

Silver Resistance: 13.11 / 13.19 / 13.25

Silver Support: 13.05 / 13.00 / 12.94

________________________________All prices SPOT

Gold Resistance: 656 / 660 / 663

Gold Support: 653 / 650 / 645

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