China stocks seen dropping another 14% as market mirrors U.S. crash of 1929

The Shanghai Composite Index will sink to 3,200 after plunging 8.5 per cent Monday to 3,725.56 in the worst selloff in eight years, Tom DeMark, who predicted the gauge\'s bottom in 2013, said on Monday.

Chinese stocks will decline by one more 14 percent over the next three weeks as the market demonstrates a trading pattern that mirrors the U.S. crash in 1929, according to Tom DeMark.

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The Shanghai Composite Index will sink to three,200 after plunging 8.5 per cent Monday to three,725.56 in the worst selloff in eight years, DeMark, who predicted the gauge\’s bottom in 2013, said on Monday. That will extend its decline since a June 12 peak to 38 percent. The index\’s moves since March are tracking those of the Dow Jones Industrial Average in 1929 once the gauge lost around 48 per cent, he said in a phone interview.

While the securities regulator denied speculation that policy makers are withdrawing their support, problem is mounting that the unprecedented intervention to prop up share prices may not be sustainable as the economy slows.

\”The die has been cast,\” said DeMark, 68, the founding father of DeMark Analytics in Scottsdale, Arizona, that has spent more than 40 years developing indicators to identify market turning points. \”You just cannot manipulate the marketplace. Fundamentals dictate markets.\”


Government Support

He made similar statements in February 2014 about the Standard & Poor\’s 500 Index, saying that if certain conditions were met, U.S. stocks had reached a point resembling the time before the 1929 market crash. The S&P 500 rallied 8 per cent over the next two months. He said Monday that those conditions didn\’t materialize at the time.

The Shanghai gauge had rebounded 16 percent from its July 8 low through Friday as officials went to extreme lengths to support stocks. Officials allowed more than 1,400 companies to halt trading, suspended initial public offerings and supplied China Securities Finance Corp., a state-run financing vehicle with more than $480 billion to intervene in markets.

The benchmark index dropped 1.7 per cent at the close on Tuesday.