by Greg Harmon
The Chinese market has been on a tear lately. So it is no surprise when you look at the weekly chart of the Shanghai Composite below, price is pulling back. It has been an 11% run up from the bottom at 2000. Technically it printed a topping doji candle last week and is confirming it this week with the move down. And this happened at the 200 week SMA. You can see that the price has not closed over that 200 week SMA since April 2010. No one should be surprised if it consolidated or pulls back here. The question though is whether this a short term or long term top. To answer that you need to look at the monthly chart.
The monthly chart presents some clues that any pullback or rest might be short lived. First, the price has consolidated along the rising 200 month SMA since mid 2012 and is rising now. Next it broke above the 5 year down trending channel two months ago and has followed through higher. It also shows a touch at the 50 month SMA and a slight pullback so far. The RSI is breaking above the mid line, very close to the July 2009 high level and is rising. As long as the Composite can stay above the 2200 level it looks ripe for more upside. and potentially a change of character to a long bullish run.