China’s Shanghai SSE Composite closed sharply higher by 4.09% today to 2654.88. The two day rebound after hitting 2449.19 on climax selling suggests medium term bottoming. And, this year’s down trend from 3587.03 has likely completed a five wave sequence to 2449.19.
That is, the index is now in medium consolidation phase that could last a few months. 2700 psychological level will be the hurdle to overcome. It’s close to 2691.02 support turned resistance and 55 day EMA at 2721.67. Firm break of this level will pave the way to 38.2% retracement of 3587.03 to 2449.19 at 2883.84. We’d expect strong resistance from there to limit upside. If everything turns out as expected, the long term down trend should resume some time next year after consolidation completes.
