Decision time for China. The Shanghai Composite is testing long-term trendline support that goes back to the mid-1990s. Resistance up top is a trendline down from the euphoric highs of 2007. So we’re essentially at the apex of two converging meaningful trendlines.
This is a logarithmic scale weekly line chart of the benchmark Shanghai Composite:
The current prices are near the 2001 highs, right before the Shanghai Composite got cut in half. There is memory at this price. That former resistance adds additional support at these levels.
The consequences of a breakdown below long-term support would really be damaging to this chart, and paints a poor picture for China. But I think there is an overwhelming amount of support where the higher probability move is a bounce. And a breakout above an almost 5-year down trendline could be explosive.
So as you can see, there’s a lot going on right now in this China chart. And I think it’s important to at least stay for the outcome. Regardless of what asset classes you own, this is probably going to have an impact.
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