Shanghai Market

The Shanghai stock index has moved to “Warning” phase since 14 August 2009. It broke its 50 day moving average with ease on 14 August. The subsequent rebound from 2800 level met with strong resistance at the 3000 level.

It seems that the Chinese government is trying to prevent a new stock market bubble from forming. However, it does seem that the Chinese government also does not want the market to drop too much.

Nevertheless, weakness is beginning to show on the charts. The index has traded in “Warning” phase for 11 trading days now.

The next support level is at 2800 level. If the index breaks through this level, it will complete a lower high and lower low pattern. This will mean a possibility for the index to test its 200 day moving average.

Hang Seng Index

Hong Kong stock market has been on a run since hitting its low on March 09. The phase chart turned “Bullish” at the end of May 09 and has been maintaining its bullish stance since then except for a dip to “Warning” phase on 13 July 09. That dip proved to be a buying opportunity.

The market has stayed in “Bullish” phase for 50 days now and it looks set to continue. However, investors who are looking to add new long positions may be better off waiting for a test of the 50 days moving average before entering. As in all market developments, this market will not move up in a straight line.