After the Shanghai Composite’s July 9 low, the Chinese government enjoyed some brief success, managing to goose the index from 3587 to 4185, or by nearly 17% — until today, that is. The index melted down nearly 9%, closing on the lows, and has the right look of the initiation of a new down-leg within the still-dominant near-term downtrend.
Meanwhile, the S&P 500 remains within its 6-month sideways range, although the price structure once again is approaching a test of key support in and around its up-sloping 200-Day EMA, now at 2060/56. That level must contain any forthcoming weakness to avert a press to 2010-1980 thereafter–within an increasingly-toppy medium-term pattern.
Originally published on MPTrader.com.
Last week, I made the mistake of buying a sandwich at Starbucks. I was pretty hungry, I happened to be near a Starbucks, and the photograph of their new product looked tantalizing. Let’s just say reality didn’t match promise.
And that, in a nutshell, is what the people of China are experiencing at this very moment. Because their corrupt, venal government has sold them a bill of goods in the form of a (formerly) booming equities market, and the freshly-minted “traders” are finally getting a good look at the bag they’re holding, and they feel just like I did: disappointed.
My view of the Chinese market is a nuanced one: I think it’s one of the most monumental frauds of human history. Having said that, I have added it to my gargantuan list of short positions by way of FXI, with a stop-loss price of 43.22
Further to my post of June 8th, here’s what has happened, since then, on China’s Shanghai Index.
After making a slightly higher high of 5178.19 on June 11th, it has since plunged to a low today (July 8th) of 3421.53 to close at 3507.19…slightly above its 200 Day Moving Average — making a loss of 1671 points from high to close, thus far.
The first level of major supports sits around 3000…the next around 2500…a solid break and hold below 2000 could cause major panic in markets around the world.
So far, attempts by the Chinese Central Bank to intervene and stop this falling knife have failed…we’ll see if this market can find any stability at any of the above-noted levels. There are no “buy” signals at this time on the RSI, MACD, and Stochastics indicators — rather, they are still bearish, although quite oversold; however, the extreme bearish force of the MACD, in particular, should be respected, as we could, very well, see much more selling in the short term.