Last August, following the recent Chinese market rout, Deutsche's Jim Reid showed a chart he used for the first time in early June comparing the Shanghai Composite recent performance with that of the NASDAQ back in 1999-2000.
As he said back then, "the ascent was very similar back in June and now the decline is pretty much on exactly the same path. So the NASDAQ '99-00 has almost been like having a stock almanac for the recent Chinese experience. It reminds me of Back to the future II where Biff steals the time machine to take a sports almanac back to his younger self in order to make millions betting on these events. A great film. Although having only watched it recently again, I was amused to note it largely takes place in 2015 and everyone has flying cars. So perhaps the pace of technical change is not as great as was anticipated back in the eighties!"
In any event, if the correlation to Nasdaq 2000 was any indication, the Chinese market was due for a modest rebound, and that is precisely what happened.
Fast forward to today, when Reid did another update of the Nasdaq 1999-2001 vs Shanghai 2014-2015 chart. Here is what he says:
The similarities continue. Both saw an initial sharp 2-3 month fall from their peaks followed by a quarter or so of stability. The NASDAQ then started to fall sharply again and Chinese equities seem to have started a similar trend on a similar timeline. While it's hard to read too much into such a chart's predictive power, it's a reminder that when bubbles pop they can pop hard and carry on falling for some time. Both Oil and Chinese equities are currently victims of such a trend.
Now if only we could find the right historical analog for the Nasdaq 2009-2016 chart, which is increasingly starting to look like the China 2014-2015 chart...