China's Shanghai Composite: Monday, November 17, 2008
Is something brewing in the Chinese stock market that could eventually have a "spill over" effect on
the U.S. stock market?
After a horrible one year drop on the Shanghai Composite, there are now signs of stabilization where the Chinese stock market could finally work on establishing a hold-able bottom. If it can now make a higher/low followed by a higher/high, then the odds will be in place for it to have a retracement rally to the upside.
That would be conducive with internal infrastructure investments made by the Chinese government which could in turn have a positive influence on our markets in the coming weeks.
Let's look at what is happening in China ...
Last night, the Shanghai moved up 2.22%. As we have been pointed out, the S.T. Accelerator was in negative territory and showing a possibility of reversing up and the RSI was holding at its support line. Last week, the S.T. Accelerator went into positive territory. There is an upside bias with a positive divergence taking effect now. The Shanghai Composite tested its long term weekly resistance and broke above it. This now increases the bias to the upside for the Shanghai Composite. The Shanghai 180 shares still has its Super Accelerator in Negative territory, so a transition to an upside rally will likely be choppy and volatile until the Shanghai Composite establishes a higher/low followed by a higher/high.
This is a Point & Figure chart on the Shanghai Composite Index. Note the upside breakout of the one year resistance line. The Shanghai Composite has now finished its one year drop and will now work on establishing a bottom support for moving higher longer term.
This is the Shanghai 180 Shares showing that its Super Accelerator is still negative which indicates that there is still bottom formation work necessary for a future up rally.
Just to keep the Shanghai Bubble's drop in perspective, this is the 10 year WEEKLY chart of the Shanghai Composite.
*** Note the resistance line we drew last Wednesday. The Shanghai Composite tested that resistance last and broke to the upside.
China's Shanghai Composite ... Yesterday's comments: The Shanghai Composite tested its long term weekly resistance and broke above it. This now increases the bias to the upside for the Shanghai Composite. The Shanghai 180 shares still has its Super Accelerator in Negative territory, so a transition to an upside rally will likely be choppy and volatile until the Shanghai Composite establishes a higher/low followed by a higher/high.
See additional comments below the chart ...
November 18th. comments: The expected choppy action is upon us already. Last night our S.T. Accelerator had a sharp down tick that took it to the signal line along with the Shanghai dropping -6.31%. (See the close up insert on the chart below.) If our S.T. Accelerator goes negative late tonight, then the Shanghai Composite will move down and retest the recent low. That would still be in line with a bottoming process as long as the Shanghai holds within 3% from the recent lows.
November 19th. comments: The expected choppy action was evident on Tuesday with a sharp drop on the S.T. Accelerator that took it to the signal line. Last night our S.T. Accelerator held at the signal line and bounced up nicely keeping the upside transition process in play. Last night, the Shanghai moved up 6.05%. Expect a lot of choppy action as this transition progresses.
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