Monday, June 8, 2015

SSEC Shanghai Index Weekly Chart 7-Year Record Highs China Goes Parabolic

The chart is not yet updated for China's overnight +2.2% gain to 5132 (purple dot). Chinese Import and Export data overnight is weak, especially imports. The domestic economy is supposed to save China but less imports means people are spending less not more. The weak data is cheered by traders since bad news is good news in these central banker-controlled global markets hence the Shanghai pops another +2.2%. The upside Chinese stock market orgy continues.

The green bull flag pattern played out with the first leg from 2K to 3.5K, a 1500-point gain using round numbers, so the second leg targeted 4.5K from its 3K starting point. Price is moving parabolic up inside the rising red wedge. This type of price action is more typical in commodities trading and never ends well. The red lines show the indicators in negative divergence except for the MACD line that remains long and strong and some two-week juice in the RSI. So the RSI red lines, histogram, overbot and neggie d stochastics will create a spank down but price should come back up to satisfy the MACD line and slight very short term juice in the RSI. This scenario should take place over the next two weeks.

The SSEC monthly chart continues to show long and strong strength so the expectation would be for the Shanghai to top out say later this week, next week, or the week of 6/22/15, not all that much higher from here, maybe 5132-5300, then down for a month or three. Then the monthly chart should reinforce itself and bring price back up again to the current record highs for a potential peak in the second half of this year and then more substantive long term roll over to the downside.

The ADX line is up to 58 firmly verifying a strong uptrend in place (pink box) so this can continue for a while which reinforces the expectations on the monthly chart. Through June into early July, however, in the shorter term, there should be softness after the MACD line peaks and creates neggie d. So now is not the best time to go long this parabolic joy ride. If big gains are enjoyed in Chinese stocks, trimming back is likely a prudent strategy, say cutting one-half the position now and then the other half when the MACD line rolls over during the coming days or week or two. SSEC is not an attractive long from here but perhaps from a summer low in July-September once price pulls back for a rest. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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