The Chinese ‘Crisis’

” The Chinese word for “crisis” is frequently invoked in Western motivational speaking as being composed of two Chinese characters respectively signifying “danger” and “opportunity”. “

This aptly describes the current situation facing investors in the Chinese market, specifically the Shanghai Composite. After a 7 month drive to the downside out of a short term consolidation, the Shanghai Composite reversed in January. It started heading higher. Mid month it was pushing through the falling trend resistance and over the 20 day SMA.

It continued higher at a rapid pace until reaching the big round number of 3000. After a brief pause the Composite pushed over 3000. It has been consolidating the nearly 25% rise, holding near 300 ever since. Earlier this week the 20 day SMA caught up to it and it is heading into the end of the Quarter under the 20 day SMA for the first time in nearly 3 months.

It is at this juncture that the Composite truly faces a Crisis in the sense above. The consolidation can break in either direction. To the upside brings Opportunity and a Measured Move to 3650. To the downside brings Danger with a gap below and the 200 day SMA below 2750. Which way will it move?

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