Shanghai Composite: Shaking out the Weak Hands

Breakdown!

After a period of weak consolidation SSEC has broken to new lows today, going down a whopping 4%. In my last post, i suggested volatility ahead, with a possibility of one more new low. This move, while unnerving to most investors, is probably nothing more than a shaking out of weak hands before a reversal(probably a sharp one) - a head fake of sorts.

Evidence is in the positive divergences that are setting up on the daily and weekly charts - from oversold conditions - in addition to volume clues cited in the last post.

Targets

Immediate target for this move lower would be 2400, followed by 2300 area - which should mark the final low before a reversal for the medium-term. I'll be looking towards accumulation of the SSEC, for the medium-term, during the next couple of months.

Will post again on the bigger picture in the bottoming phase. All the best!

Hang Seng Index: Trendline Watch

A month ago, on the HSI Trendline Watch, i posted the below chart, suggesting a move down to 18800, before a bullish reversal to test 19400 initially. "Medium-term, the chart has the potential for a bullish Inverse Head & Shoulders, and looks decently setup for one more wave up."

And this is what has transpired so far, pretty much on target:

Leaving behind its affliations with the US & China, HSI has gone vertical, tacking on a good 10% so far! Currently consolidating just below the 200-day moving average, prices will run into upper channel line resistance on any further moves up, especially around 21700. A sustained break above the upper trendline will take time, but may target the 26000 area.

So, watch out above folks!

S&P500 short-term: Stiff Resistance around 1100

In my last post, i was looking for a post-breakout consolidation period above 1100, before a launch higher towards 1140-50 area. What actually transpired was a straight up move to 1131, and a prompt reversal below 1100 area. This is bearish action.

In the very short-term, we are oversold on the major indices, and we can expect a continuation of the friday reversal, early next week, towards STIFF RESISTANCE of 1100. A convincing break above 1100 area is needed for a retest of 1130 levels. A believable Head & Shoulders pattern, would require more work on the right shoulder for sure. Meanwhile, the range would be between 1040 & 1100.

Alternate EW labelling

Although the wave A labelled above looks like a complete 3-waver, there is always the probability that the action towards 1040 was a nested 1-2, 1-2. In this case, a severe wave 3 could follow.

Except for daytrades, I am going to sit out this market for now. All the best!