Technicals | Aug 15 2012
Bottom Line 14/08/12
EW Trend: Corrective
Price Trend: Down
Trend Strength: Weak
Technical Discussion
LAYMANS:
The Shanghai Composite Index in between reviews has broken below the critical 2132 price area. And that is something that cannot be ignored from a bearish perspective. Since the break, 2100 has been attained and buyers have returned around this psychological number . Opportunistic perhaps, yet I doubt they will stick around if 2100 is broken below now shorter term. The only shining light is that the breakdown, at least initially, has not gathered bearish steam.
Yet it is way too early to dictate whether downside momentum is merely only going to be a matter of time. The chart is as weak as you can get, so I'm going to require a lot more evidence just yet before announcing price is anywhere near out of the bearish woods. Best case scenario for the moment looks to be sideways. Yet whilst price continues to hover around anywhere below 2250, then things will continue to be on very fragile ground.
TECHNICAL:
Price has been drifting lower for three solid years now within a lowering support channel. And only a break above 3068 is going to convince me that better days may lay ahead. Yet that is nearly 45% above present levels. So we are a long way off feeling even a remotely positive . Perhaps the only light at the end of the tunnel is centred on the longer term charts. Where price could loosely be defined as basing ever since the 1665 October 2008 lows were locked into place. So from a longer term perspective, and whilst 1665 continues to hold, maybe price action can simply be defined stable as and biding its time before the next major run higher can finally look to trigger.
The only thing is, basing patterns can draw out for years on end. This one has been nearly 4 years in the making already, yet who is to say it wont go on for another 4 years. The fact is no one really knows. Price will tell us when it is good and ready to break away from this longer term routine. Yet right at the moment it is clearly providing little in the way of answers, and remains very weak. A swing above 2177 will certainly provide a potential early signal that it is making attempts to dig itself out of a grave. Be it shorter term the Bears are going to be in complete control here, at least until 2450 and then 2550 can be broken past. As mentioned though, the longer term channel breakout is what we are ideally looking for. To think price was sitting over the 6000 mark back in October 2007. And with U.S Indices in comparison now having recovered a majority of those losses, the very poor performance in the Composite can really be put into perspective.
Trading Strategy
I wouldn't be recommending any exposure to this market, ETF's or otherwise, whilst price is signalling as being so chronically weak. We've mentioned some triggers in our technical section tonight that may start sparking some interest, yet for the moment price has shown us little in the way of encouraging our interest. Our own Australian market has obviously been weighed by fears of a major Chinese slowdown. Yet there are minor signs starting to surface that those fears may be starting to subside a little . At least on our own XJO. Like I said though, the technicals are weak here, and a lot more proof is going to be required before this market can regain even a small amount of our confidence. Until then, this is spectator sport only.
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