Can China Stock Market Hold Up Despite Wall Street Weakness?

By: Mike_Paulenoff

Instead of breaking out to the upside above 2700 today, the Shanghai Composite instead rolled over into a bout of profit- taking (-1.8%). That said, however, let's notice that the weakness has not violated any meaningful technical levels, which are clustered in the 2593/90 area, and again down at 256.00. A downside sustained breach of 2564 -- the prior pullback low -- will indicate that the Jul 2-Aug 19 upleg is complete, and that a significant correction is in progress that could press the index back to 2500-2470, or even revisit the July low area at 2400-2320.

Right now, the most bullish scenario calls for a bit more weakness into the 2600 area followed by an upside reversal that initiates a new upleg. A climb that sustains above 2700 is needed to trigger upside acceleration. The $64K question is whether the SH COMP is leading the SPX or vice-versa? Let's notice that the SPX weakness today further diverges from the technically stronger SH COMP.  I will be very interested to see if the China market can hold up despite the SPX weakness, which will further convince me that we are witnessing a major transition in equity-business-economic hegemony to the East from the West.

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By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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