China’s stock market advance into 2010 came to a halt since news that China’s authority is curbing lending for some banks. The measures taken may not be bad in the long run as it will prevent asset bubbles from getting out of hand. Taken in the broader context, it will create an environment that will allow equities an opportunity to move up in a more sustainable mode. However theoretical idea is not the one that brings in the money, only price action does. And the market has signaled that it has other ideas.
Technically, the Shanghai index has moved into “Warning” phase. It broke the longer term uptrend line and closed below the historical support level of 3000 on Friday. If the index rebounds from this level, it will most likely move into a sideway trading range before the market decides on its next move.
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