The equity action in China continues to confuse - even
Confucius is confounded.
The short term action, until yesterday, has been encouraging
as the Shanghai Index moves off its lows. The double bottom and rally of +6%
from the bullish engulfing in late September was the tell. But as you can see from the recent action,
yesterdays big distribution day took out the 50day sma just as momentum starts
to roll over from overbought territory - see lower portion of the chart.
Conversely, a weekly chart of the Shanghai Composite shows
encouraging longer term price action and more importantly oversold weekly momentum
that is starting to turn up - chart not included. It needs to make a higher
high and or move over a major moving average, but the foundation for such a bounce
is forming.
So not only is Confucius confounded by this confusion but so
are us mortals. Given the technical backdrop, expect the short term action to
lead to lower prices and watch for both daily and weekly support levels,
if/when tested, to hold.
Why is this important you may ask? Because the direction of
the Shanghai market may give important hints of risk on/off for trading in the
US. STAY TUNED!
No comments:
Post a Comment