Sunday, August 2, 2015

SSEC Shanghai Index Daily Chart Chinese Officials Trying to Hold the 200-day MA

Chinese stocks are set to begin trading shortly for the new week ahead. Price begins at the strong price support from late March. Chinese regulators are watching the 100-day MA at 4202 and rising and the 200-day MA at 3550 and rising. Note how the two important moving averages bracket price with an upward-sloping channel ever since July started. Chinese officials have told brokerages to hold the line at the 200-day at all costs. This sets up an exciting ride for overnight trading. Can the communists maintain the SSEC above the 200-day MA or will they fail?

The PBOC (China's central bank) started lowering rates and instituting other stimulus measures in November. Rates were cut in March and triple R's (reserves required to be kept on hand by banks) were also reduced which began the large leveraged melt-up in the SSEC. If the 3200-3400 area fails, China has a major problem on its hands; this would signify that all their obscene central banker intervention is for naught. The thin brown lines show important support and resistance levels and a move through 3200-4200 may be the path ahead into year-end.

The green lines show indicators printing higher lows but the price did not come down to 3400 or lower to create a lower low than early July so positive divergence cannot exist. Instead, the indicators are in tune with a chart that tends to stagger sideways like the town drunk. The red lines show the overbot conditions, rising red wedge and neggie d all bearish which create the spankdown off the top in mid-June. The collapses from rising wedges can be quite dramatic; the SSEC collapsed from 5200 to 3400, a huge 1800 points, -35%, in only 18 days. The Shanghai Index was dropping -2% per day for over three weeks time. (Think about the ominous rising wedge patterns on the SPX monthly chart, as well as Dow and Nasdaq).

The blue lines show a potential falling wedge pattern that may develop into August and September to form a base in price. Price may be destined to come back down to test the 3400 level (early July low). This would create possie d with the green lines and a relief rally will develop. The pink boxes show the strong trends in price (the black line is above 25). In April and May the China bulls were running strong, Ma and Pa in the paddy's took their life savings and invested it in the SSEC, and the wine was flowing like water. The strong trend higher, however, ended in early June with the ADX line dropping. That told you trouble was coming along with the overbot conditions, rising wedge and neggie d on the indicators.

Currently, the ADX is at 31.06 remaining inside the pink box above the 25-ish level. As long as this is the case price will keep dropping and trending strongly lower. If you want the SSEC to recover you want the ADX to drop under 25 to signal that the strong downside move in price has ended.

Watch the 100-day MA at 4202 and 200-day MA at 3550. The battle lines are drawn. There may be lots of excitement at 3550 overnight. Let the festivities begin. 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.

Note Added Monday morning, 8/3/15, at 9:04 AM: The SSEC drops to test the 200-day MA at 3550 to begin the week and the brokerages step in to defend the level as the Beijing communist leaders demanded. The SSEC closes the Monday session at 3623.

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