Do Technical Charts Even Mean Anything In Shanghai?October 21 | Posted by Kevin Monaghan | Inside Trader Highlights
In the last few weeks, many markets around the world have been testing major support levels. For example, 4 weeks ago the S&P 500 was trading at levels that suggested the markets could to break to the downside. Just as it looked like a recession was imminent; they wound up surging over the last few weeks and are now testing a break to the upside.
However, one global market is still right at a major support level and grabbing the attention of many analysts out there.
For most of the last two and a half years, China was given credit with leading the world out of recession and fueling global growth. You wouldn’t know that by looking at a 2 year chart of the Shanghai Stock Exchange Composite Index, which has lagged many global markets in performance. Today, the Shanghai Index has its back against the wall as it is approaching its own technical support level as seen in the chart below.
Do the technical charts even mean anything in China? Not as much as it means in other markets around the world because this index tends to trade to the tune of its own drum. The exchange itself is seen by the locals as more of a casino rather than a financial institution. Many investors can’t rely on accurate data, management honesty, and accounting.
However, the Shanghai Market is a more important indicator than it has been in the past. In today’s global world, you have to keep an eye out for what’s happening in China. The bearish rumors of a hard landing, US currency pressures, slowing exports, closing factories, less commodity orders, property bubble, and more, will affect the global market place. Commodities have gotten hammered on this lately, but keeping an eye on the Shanghai market might give you a forward indication of confidence levels from one of the largest consumers.
Author, Kevin D. Monaghan, Senior Partner at Elite Investment Group, is long CHL