Shanghai Index Enters Bearish Phase

China market had a bad day yesterday. The Shanghai Index broke through its 200 day moving average, forming a long black candle. The move was triggered by the authority’s stance on controlling the property market in China. The market took the news negatively and the index closed below its 200 day moving average to end at 2980.

The phase chart has also moved to “Bearish” phase. The longer the index stays below its 200 day moving average, the more “Bearish” it gets. The best scenario for the bulls is for the index to move above its 200 day moving average in the next few trading session and for the index to move above 3200 level. However judging from yesterday’s performance, it is unlikely that such scenario will play out. It is best to take a defensive stance and to wait for a better opportunity to buy into this market.