Monday, January 30, 2017

SSEC Shanghai Index Weekly Chart; Sideways Symmetrical Triangle

The Chinese are having a good time all weekend long into this week, drunk as skunks, staggering around, setting off commercial-scale fireworks in the streets, celebrating the Lunar New Year, the Year of the Rooster. Cock-a-doodle-do. It is great they can escape for a few days from the realization that their lives are dictated by a few communist leaders hiding behind a curtain in Beijing.

Everyone will need to party-hardy since a day of reckoning may be at hand for the Chinese stock market. At the same time, a day of euphoric glory may be on the come. The sideways symmetrical triangle is in play. The SSEC has to make a major up or down decision and the direction move will likely be epic (over, say, the next couple years). The moving averages are lining out sideways. The standard deviation bands are in tight forecasting a major move coming.

China is burning through their reserves to manipulate the yuan currency and to maintain the SSEC above the 2800-3000 level for the last couple years. The reserves are now under $3 trillion. Since China does not disclose its financial system, it is difficult to know how long the cash will hold out. China has to keep a portion on hand to maintain stability in banks and confidence in the financial system. This is likely at least one-third or more. More cash must be kept on for other ongoing government affairs. Thus, the Chinese reserves may only have a year or two of juice available. Unfortunately, this cannot help provide an educated guess on which way the chart will break. China's PBOC may goose like madmen and the upper targets may be achieved before a huge rollover. Or, perhaps fear develops that China's reserves are far lower than reported and they are in deep trouble which exacerbates a collapse lower beginning in the nearer term.

The sideways symmetrical triangle has a vertical side at about 2450 points. The shorter vertical line only using the price moves on the downside of the 2015 peak is about 1500 points. Thus, if you use 3160 as a pivot point, where price either begins trending lower, or higher, to break from the triangle, the upside target is 4660-4810 and the downside target is 1510-1660. Our friends in China need to drink up and enjoy the next couple days since this year may be a crazy ride. The trend breakout will likely be confirmed to the downside with a drop under the 200-week MA at 2812 and the upside breakout can be confirmed by taking out the 3700-ish resistance. The Beijing communist leaders continue frantically puling at levers behind the curtain. 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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