Market Direction and Stock Trends

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China - Shanghai Composite - Stable »» Monthly Summary Analysis
By: Marty Armstrong | October 12, 2019

THE ANALYSIS PER THE CLOSE OF Fri. Oct. 11, 2019: Shanghai Composite closed today at 2973660 and is trading up about 19% for the year from last year's closing of 2493896. Currently, this market has been rising for this month going into October reflecting that this has been only still a bullish reactionary trend.


As of now, the market remains neutral on the short-term levels of both momentum and trend on our indicators while the long-term trend and cyclical strength are bearish.

The historical major high took place back in 2007 and we have then witnessed a bearish subsequent trend for 11 years. The correction since that high has been a 27% decline with the next general key area to watch would be 4201094 and a closing beneath that would technically imply a more correction process unfolding on a bit more sustain basis near-term. There was a subsequent correction low that formed during 2008 and we have bounced some 78% which has been a respectable advance to date. We have elected two short-term yearly buy signals during this bounce currently. This market on the yearly level has been consolidating and moving higher since the low established during 2008. However, we did elect 1 Bearish Reversal from the high formed on during 2015 which provided the decline into during 2018. Nonetheless, we have not elected any Bullish Reversals from the last low established during 2018.



Our timing models warn that a turning point is due come December in Shanghai Composite so we should remain focused. The last cyclical event was a low established back during August. Normally, this implies that the next turning point should be a reaction high. However, the market has made a rebound to the upside so we could see a potential reaction high at that time frame. Last month produced a high at 3042930 but closed on the weak side and so far, we are trading neutral within last month's trading range of 3042930 to 2883682. We need to breakout of this range to confirm the direction. Therefore, a close above will be bullish and a close below will warn of a possible decline.

Some caution is necessary since the last high 3288453 was important given we did obtain two sell signals from that event established during April. That high was still lower than the previous high established at 3587032 back during January 2018. Critical support still underlies this market at 2653111 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. Nevertheless, at this time, the market is still weak. Taking a broader view, this market is in a downward trend on all our indicators looking at the monthly level. Aiming on the direction of this trend, we had been moving down for 4 months. Subsequently, the market has consolidated for the past Monthly session. The previous high made during April on the Monthly level at 3288453 remains significant technically and only exceeding that level on a closing basis would suggest a reversal in the immediate trend. The previous low of 2440907 made during January on the Monthly level has held and only a break of 2733924 on a closing basis would warn of a technical near-term change in trend. However, we still remain above key support 2462845 on a closing basis.

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