Shanghai: SSE Composite Index (.SSEC) trading 50% below its bubble high of 2015

Shanghai: SSE Composite Index (.SSEC) trading 50% below its bubble high of 2015

Shanghai: SSE Composite Index (.SSEC) trading 50% below its bubble high of 2015

The Chinese stock market has lost $3 trillion in the last six months since the beginning of the trade war with the US. The Shanghai Composite Index, the country’s benchmark stock index is trading now 50% below its bubble high of 2015.

At the current level of 2,548 points, the index is down more than 50% from 5,166 level, it attained in 2015. The index has lost 22.93% since the beginning of this year and fallen 24.41% during the last one year.

The drop followed a week of declines that sent the Shanghai Composite to levels not seen since 2014.

While last week’s sell-off was inspired by woes on Wall Street, its continuation in A-shares this week shows that Chinese investors have little confidence in their government’s willingness to support the market, said a Beijing-based trader.

“The message from the central bank has been very positive,” he said. “However, markets are hoping for action, not words, to support enterprises.”

The People’s Bank of China’s 100-basis point cut to banks’ reserve requirement ratio (RRR), announced by the central bank on October 7, took effect on Monday, easing pressure on the yuan. But that has done little to restore confidence in equities, said this trader.

“Banks have looser liquidity, but the money is not finding its way to the real economy. The impact on stocks is very small,” the trader added.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 2,770.33.

The projected upper bound is: 2,673.16.

The projected lower bound is: 2,437.47.

The projected closing price is: 2,555.32.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 15.3062. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 7 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 34.97. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 66 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -111.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 4 period(s) ago.

Rex Takasugi – TD Profile

SSE COMPOSITE closed up 15.284 at 2,561.614. Volume was 2% above average (neutral) and Bollinger Bands were 43% wider than normal.

Open High Low Close Volume___
2,574.3132,582.5492,517.5732,561.61412,995,399,680

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 2,664.29 2,719.52 3,048.36
Volatility: 38 28 23
Volume: 13,732,288,512 12,169,377,792 15,057,437,696

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

SSE COMPOSITE is currently 16.0% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .SSEC at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .SSEC and have had this outlook for the last 3 periods.

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