Chinese Market Saying No!

Chinese President Xi Jinping says no when it comes to joining the global stock market party. Well, maybe its not just him, but the market is not having any of this global orgy of new market highs. The Chinese market has had a strong second half of the year. Since May it is up over 10%. But the last several months have been filled with indecision. While you were stuffing your face with turkey Thursday, the Shanghai Composite fell over 2%. It has settled into the weekend, to finish the week down about 1%.

The chart below tells the broader story though. After a 5 month move higher in a rising channel, the Shanghai Composite has spent the last 3 months mainly moving sideways. It has built an expanding wedge as it oscillates around its 20 day SMA. It had a failed break out of the wedge earlier in the month. And Wednesday day the price had touched the top of the wedge, looking strong. But all that changed as we celebrated.

The strong move lower on Thursday took the Composite back to the bottom of the wedge. As I stated earlier, Friday (not pictured) saw it bounce, and finish 2 points higher. Still in the wedge. But momentum took a big hit this week. The RSI is making another lower low and at the lower edge of the bullish zone. The MACD failed to cross up and reversed lower, heading towards zero. Price remains over the prior 1 year broad channel, but is struggling. Is it just consolidation or a top? Time will tell.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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