NewScientist.com:

... a team of physicists and financiers [successfully predicted] a steep fall in the Shanghai Stock Exchange.

Their model, which employs concepts from the physics of complex atomic systems, was developed by Didier Sornette of the Financial Crisis Observatory in Zurich, Switzerland, and Wei-Xing Zhou of the East China University of Science and Technology in Shanghai. The idea is that if a plot of the logarithm of the market's value over time deviates upwards from a straight line, it's a clear warning that people are investing simply because the market is rising rather than paying heed to the intrinsic worth of companies. By projecting the trend, the team can predict when growth will become unsustainable and the market will crash.

Sornette, Zhou and colleagues applied their model to the Shanghai Composite Index, which tracks the combined worth of all companies listed on the Shanghai Stock Exchange, the world's second largest. Early this year, the index gained 50 per cent in just four months. In July, the team predicted that the index would start to fall sharply by 10 August (www.arxiv.org/abs/0907.1827). The index duly began to slide on 4 August, falling almost 20 per cent in the subsequent two weeks.

Now "everyone" is predicting even more.

Shanghai Index May Drop 25% on Economy - Bloomberg.com

The Shanghai Composite Index, the world's worst performer in August, may fall another 25 percent as China's economic recovery isn't "sustainable," former Morgan Stanley Asian economist Andy Xie said.

The measure plunged 6.7 percent to 2,667.75 yesterday, the most since June 2008, and entered a bear market on concern a slower lending growth may derail a rebound in the world's third- largest economy. Xie said the index "should be 2000 or less." The gauge rose 0.6 percent to 2,683.72 today.

"The market is in deep bubble territory," Xie, 49, who correctly predicted in April 2007 that China's equities would tumble, said in an interview with Bloomberg Television.