Shanghai Composite SSEC

Today the Shanghai Composite SSEC finally gave way to sellers and came down sharply as shown by the daily chart above. At one stage it dropped 7.6% to 3174 before some buying to pushed it higher to close at 3266 for a 5% drop.

SSEC remained in an over-bought position since early June as shown by the two technical indicators below. As usual, the longer an index stayed in an over-bought or over-sold position the sharper would be the correction.


SSEC after hitting a peak of 6092 in October 2007, same as Dow, it dropped all the way to 1706 by November 2008 for a 72% drop, 18% more than Dow. From the low of 1706 to July 28 closing of 3438, that was a gain of 101%. Dow from March's low to July 27 height, gained only 39%.

Further drop by SSEC can trigger a meaningful correction to Hang Seng and Singapor STI. Dow may start to move lower to complete sub-wave 2 pullback of wave (III) of the major B as shown below. It is unlikely that SSEC, Hang Seng, STI and Dow will go all the way down from here because there are simply too much money at the sideline. Too much money has been printed in the last six months.