By Mark Galasiewski
The Shanghai Composite Index is forming an important low at the start of a significant advance in Chinese stocks. The following charts and text present a portion of the evidence to support the bullish case: valuation considerations.
After a large-degree bear market like the one since the 2007 high, even asset valuation measures can become useful tools of technical analysis.
Value investors cherish measures of fundamental value, such as price/earnings (P/E) ratios and dividend yields, to help them decide whether a stock is expensive or cheap. But the wide and inconsistent range in such metrics shows that they are only byproducts of the same non-rational forces that drive stock trends. In financial markets, unlike economic markets, value exists only in the minds of the collective — that is, price reflects (subjective) consensus, not (objective) supply and demand. Therefore, asset multiples rise along with swelling optimism during large-degree advancingRead More »from Commentary: China’s Bull Is Back