Since the start of the year, the Shanghai Composite Index is down about 12%. But this composite peaked back in August, 2009, and it is down about 17% from those highs. We can debate the reasons why the Chinese market is down, but there is no doubt that US equity bulls should be concerned that the Chinese market has been diverging from the US indices. After all, the Shanghai Composite led the US markets off the bottom back in late 2008 and early 2009. US Equity bulls appear to be ignoring the fact (or just living in a vacuum) that the stock market of one of the world's leading economies has not made a high in over 8 months.
Figure 1 is a weekly chart of the Shanghai Composite Index. Key pivot points are identified by the black dots. Support comes in at 2675 or some 200 points or 7% lower.
Figure 1. Shanghai Composite Index/ weekly
Figure 2 is a daily chart of the Shanghai Composite Index. Key pivot points are identified by the black dots. Resistance is at 2936 and support comes in at 2669.
Figure 2. Shanghai Composite Index/ daily
I would look for the Shanghai Composite to bottom around 2675 and this might be a signal that the burgeoning sell off in US equities has run its course as well.
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3 comments:
What, only a 7% correction? I'm waiting to buy at 2200.
Let's say this: it will stop at 2675 and bounce; that is the one you are playing for now
If it gets to 2200, then it does and you will play it there
Guy, I think you have received the proper "Ticket to Ride" on this call. If this and EEM don't sound a bottom, look out below. I too don't see these inflated bubble markets having completely run their course as yet. Down to the last week in May and we "Ride".
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