SSEC, SPX WEEKEND REVIEW

The market has been rattled to start the year because of hydrogen-bomb news from North Korea, and also "news" of weak economic data out of China. As a result we have seen wild volatility with the market making wild opening gaps almost every day. It is certainly not a favorable trading environment but we just have to let it run its course. I'm not worried about both news having any long-term annoying effect on the market. I believe that this year will be a great year for trading. I also believe the Chinese stock market currently at its multi-year bottom. So either the low was put in this week or it will happen the coming week (in the form of a Hammer or Long-legged doji candlestick). I say this because of what I see on the chart of Shanghai Composite Index (SSEC) which I have been monitoring since the middle of 2015. I also commented on it back in September (see comment and chart below).

What I noticed is that SSEC weekly chart is behaving very similar to the SPX daily chart of 2010 (see chart below). So "news" out of China is a small part of the real cause of recent drop. The truth is that, technically speaking, SSEC was going to drop as it did the past few weeks because it is forming a bottoming pattern. So though the fundamentals from Shanghai showed weakness based on the economic data released when the drop started, it was just the catalyst/excuse for the inevitable drop in SSEC.
Given that SSEC dropped significantly in 2015, the "bad" economic data released a few weeks ago created fear in the minds of investors since "bad" economic reports was seen as the cause of the 2015 drop that caused global panic. So the memory of that event was still very fresh in the minds of investor. As a result, folks were quick to dump stocks globally the past few weeks as a result of fear rather than facts. Had SSEC's drop been gradual, we wouldn't have seen the global reaction that took place recently. It would have been contained only in China. It means that a leg up in SSEC will also result in a global rally since "a rising tide lifts all boats". The good news is that SSEC is now at a very good level for the next leg up which will also lead to the end of the wild volatility.

China is doing just fine technically. This year will be a very good year for SSEC. So the faster it moves to complete the Bottoming Pattern/Inverse Head and Shoulder, the sooner the multi-year recovery/bull market will start. So I'm happy to see how fast it happened because I want to see China takeoff.

Note: Before clicking on the SPX-2010 or SSEC charts, make such you compare them on this page first since it will be harder to appreciate the similarities while looking at one at a time.


This is the comment I posted regarding China on Friday, September 11, 2015:
Regarding China, I believe for the next 6-8months it will make strong moves up and down in a coherent manner as it stays in a sideways range while creating an Inverse Head and Shoulder bottoming pattern before a run up begins that will last for years. So the damage has already been done. The healing process is now taking place. It is now time for long-term traders/investors to start buying Chinese stocks again. But a drop towards the end of the year as it continues forming a bottoming pattern should be expected. Another factor regarding China is that the economic data has been very bad of late. That is a bullish (not a bearish) sign. When folks/media start giving all kinds of reason to stay away or short Chinese stocks/ETFs that is the best time to be bullish.


SPX-2010


SSEC


SPX-MONTHLY IV


SPX-MONTHLY III


SPX-MONTHLY II


SPX-MONTHLY I


SPX-WEEKLY


SPX-DAILY VI


SPX-DAILY V


SPX-DAILY IV


SPX-DAILY III


SPX-DAILY II


SPX-DAILY I


SPX-30MIN III


SPX-30MIN II


SPX-30MIN I


SPY-15MIN