Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20
China Recovered in Q2. Will the Red Dragon Sink Gold? - 23rd Jul 20
UK Covid19 MOT 6 Month Extensions Still Working Late July 2020? - 23rd Jul 20
How Did the Takeaway Apps Stocks Perform During the Lockdown? - 23rd Jul 20
US Stock Market Stalls Near A Double Peak - 23rd Jul 20
Parking at Lands End Car Park Cornwall - UK Holidays 2020 - 23rd Jul 20
Translating the Gold Index Signal into Gold Target - 23rd Jul 20
Weakness in commodity prices suggests a slowing economy - 23rd Jul 20
This Stock Market Stinks - But Not Why You May Think - 22nd Jul 20
Protracted G7 Economic Contraction – or Multiyear Global Depression - 22nd Jul 20
Gold and Oil: Be Aware of the "Spike" - 22nd Jul 20
US Online Casino Demographics: Who Plays Online For Money? - 22nd Jul 20
Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035! - 21st Jul 20
How to benefit from the big US Infrastructure push - 21st Jul 20
Gold and gold mining stocks are entering a strong seasonal phase - 21st Jul 20
Silver Eyes Key Breakout Levels as Inflation Heats Up - 21st Jul 20
Gold During Coronavirus Recession and Beyond - 21st Jul 20
US Election 2020: ‘A Major Bear Market of Political Decency’ - 21st Jul 20
Summertime Sizzle for Gold and Silver - 21st Jul 20
Overclockers UK Custom Built PC Review - Delivery and Unboxing (3) - 21st Jul 20
Will Coronavirus Vaccines Become a Bridge to Nowhere? - 20th Jul 20
Stock Market Time for Caution?  - 20th Jul 20
ClickTrades Review - The Importance of Dynamic Analysis and Educational Tools in Online Trading - 20th Jul 20
US Housing Market Collapse Second Phase Pending - 20th Jul 20
Capitalising on the AI Mega-trend - 20th Jul 20
Getting Started with Machine Learning - 20th Jul 20
Why Moores Law is NOT Dead! - 20th Jul 20
Help the Economy by Going Outside - 19th Jul 20
Stock Market Fantasy Finance: Follow the Money - 19th Jul 20
Did the Stock Market Bubble Just Pop? - 19th Jul 20
Quick Souring of the S&P 500 Stock Market Mood - 19th Jul 20
The Six-Year Jobs Recession - 19th Jul 20
Silver Demand Exploding! - 18th Jul 20
Tesco Scraps Covid Safe One Way Arrow Supermarket Shopping System - 18th Jul 20
The Rise of Online Pawnbroking - 17th Jul 20
Gold Rallies Together With U.S. Covid-19 Cases - 17th Jul 20
Gold & Silver Measured Moves - 17th Jul 20
The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits - 17th Jul 20
From a Stocks Bull Market Far, Far Away, Virus Doomsday Scenerio! - 16th Jul 20
Fiscal Cliffs and the Self-destructing Treasury - 16th Jul 20
Dow Stock Market Crash Watch - Update - 16th Jul 20
Gold & Silver Gaining on US Dollar Weakness - 16th Jul 20
How to Find the Best Stocks to Invest In - 16th Jul 20
Overclockers UK Custom Build PC Review - 2. System Build Changes Communications - 16th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Commodity and Financial Markets Chart Analysis

Stock-Markets / Financial Markets 2010 Mar 08, 2010 - 11:30 AM GMT

By: Mike_Paulenoff


Best Financial Markets Analysis ArticleThe Chinese market, as represented by the Shanghai Composite has a very vulnerable aspect to it and needs to do some serious work on the upside to take off and extend its bull move.

Looking at the Shanghai, one sees the low in October 2008 to the high in August 2009, followed by a sideways consolidation. We can look at this as a digestion period of its huge upmove, which becomes a bullish/pennant type pattern. However, after a 6-month sideways stint, one would expect a breakout, but instead it continues to coil.

The Shanghai Composite needs to take off again in order for it to extend the bull market. Otherwise, if it breaks down and takes out the 200-day at 2993, and then retests the trendline at 2925, it could end up having a very severe downtrend in China. That would belie the positive message coming out of China this past week that monetary policies will remain accommodative and fiscal policy will remain stimulative.

Or it would confirm that the reason the Chinese authorities are so accommodative and so stimulative is because the Chinese economy is not nearly as strong as everyone thinks it is or would like to believe it is.

Comparing the Shanghai to the S&P 500, you see that the SPX was consolidating Tuesday, Wednesday and Thursday, and then popped on Friday after the news about the U.S. employment numbers. The Shanghai shows that China was struggling even before the employment news came out. The Shanghai chart patterns looks heavy, vulnerable, while the SPX took off and looks like it's headed right back to retest the January highs around 1150.

The S&P 500 chart suggests that money is coming into the SPX and is either stagnant in the Shanghai or actually coming out of the China index. This shows me that perhaps if the global economy is expanding, it is doing so because the U.S. economy, and not the Chinese, will lead the way out, even though China is perceived to be the buyer of everything -- natural resources, gold, grain, etc.

Can the S&P 500 continue higher with the Shanghai going down? My suspension is no, but I have a feeling we're going to find out in the next few days. The S&P 500 is probably going to test the 1150 level, and if it breaks out and stays at that level and consolidates, it's going to take off. My suspicion is that the Shanghai will then make headway in testing its key resistance at 3250.

That's the bullish scenario. If the S&P 500 fails at around the 1150 level it could have a series of down moves right off the double top.

So what does all this mean to other markets? Let's take a look at the Market Vectors Steel Index ETF (SLX), which rocketed last week. The stocks that made it explode are United States Steel Corp. (X), foreign holding AK Steel (AKS), Steel Dynamics (STLD), and Cliffs Natural Resources (CLF), the most bullish of the group.

Looking at this SLX you see steel is taking off, and would immediately think it's a function of China. But in order for that to be true, the Shanghai has to make some headway to the upside. My suspicion is that the SLX started an intermediate-term correction in January and ended the first leg of it in February, and now we're having a move that's retesting the high levels and then it's going to fall apart again. That, to me, will be a more accurate indication of not only China's influence on the natural resource areas but also that the US economy is not as strong as the S&P 500 chart would lead us to believe.

The Market Vectors Coal ETF (KOL), another natural resource ETF, had a huge week and it, too, looks similar to the SLX. It could be in an intermediate-term correction, with a corrective leg down in January to February, a strong intermittent rally in February and March, and then a downmove in March-April. This week, if everything takes off, the KOL will probably peak around 39-40 and then reverse.

However, if it keeps going with the S&P 500 that will be very bullish in general for natural resources and the natural resource names and I would expect to see the Shanghai up-ticking to reflect the US economy improving and the natural resource demand improving or reigniting from China.

Looking at other resource ETFs, the Oil Service HLDRs (OIH) looks relatively toppy in general and nowhere near as dynamic as steel and coal. The Energy Select Sector SPDR (XLE) is also lagging. The Ultra Oil & Gas ProShares (DIG) is lagging but has broken out a bit to the upside on all of its moving averages, the 200-day exponential on Friday and closed above it for the first time.

The oil component of global demand seems to be the laggard, which bothers me, so I have to look at the driver of natural resource demand, the Shanghai Composite, as being somewhat suspect here. I also have to look at the money being attracted into the steel and coal sectors as being more of a momentum play than a reflection of resurgence in the US economy. I'm watching all of these components more closely because I need more clues; I need to know that the S&P 500 isn't breaking out merely because some of the natural resources and the financials are showing some signs of life for a change. Because without China it would seem to me that it can't extend that far.

Sign up for a free 15-day trial to Mike's ETF & Stock Trading Diary today.

By Mike Paulenoff

Mike Paulenoff is author of (, a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

© 2002-2010, an AdviceTrade publication.  All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Mike Paulenoff Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules