Shanghai Index Is Lagging – Price Divergence With S&P 500

by Olivier on April 29, 2010

The most noteworthy observation going through my public list is the fact the Shanghai Index as of yet cannot break out of its bullish flag pattern. China is perceived to be the new leader and economic motor of the world. Others disagree. We simply stick to the charts. If a former leader doesn’t lead anymore this raises a red flag as divergences or non-confirmations are always a concern. Within an index sector rotation takes care of leaders falling behind. On a worldwide basis I cannot see how this sector rotation will play out in case China falls behind. It’s still early but these could be the first signs of a significant divergence with the current strength of the S&P 500 chart.

SSEC Shanghai Index Monthly Chart Bullish Flag Divergence S&P 500

Up-to-date SSEC – Shanghai Index Chart on my public list.

I talked about this topic in a former article covering CYD – China Yuchai and CAAS – China Automotive Systems, two Chinese stocks in the automotive sector. Both stocks are sending mixed signals. Both look bullish but still need to break out with conviction. I am closely monitoring both stocks.

More thoughts:

  • GG – Goldcorp: Volume is not great but good enough to be interpreted as a positive signal for the gold mining sector as a whole.
  • HUI – Goldbugs Index: The HUI bullish wedge pattern I drew into the chart is starting to play out well.
  • PKL.TO – PC Gold: News will come out soon. The chart still tells me odds for good news are great. PKL.TO now has 4 drill rigs on their property. In my book this is a great sign of confidence the company is displaying.
  • KIV-V – Kivalliq Energy: I am starting to see lots of analysts and newsletter writers labeling Uranium as an undervalued commodity with a bullish supply demand structure. After all we might indeed be very close to a Uranium Price Turnaround. We still need more Uranium stocks to start moving up though. So far not much happening.
  • CIDM – Cinedigm Digital Cinema + BTN – Ballantyne Strong: Both look good. The Movie Industry theme stocks all look pretty good. Movie Industry Sector Overview Chart.
  • TIVO – TIVO Inc.: Same applies for the Entertainment Sector Overview Chart. The TIVO chart looks like a buyout is coming.
  • SWC – Stillwater Mining: Holding up better than expected. Maybe an ascending triangle in the making. Platinum Sector Overview Chart.
  • LVS – Las Vegas Sands, MGM – MGM Mirage, WYNN – Wynn Resorts: Casino stocks are moving up and some are printing new 52 week highs, suggesting the run is not over yet. Casino Sector Overview Chart.
  • APKT – Acme Packet: Up big time in after hours trading. A leader assuming its role as a leader. No matter what you might think – don’t short this market.
  • VEN.TO – Ventana Gold – GSL.TO – Greystar Resources: VEN.TO still hasn’t completely recovered from its ‘Hole in the wall’ pattern. I might be wrong but in my book the recent gap down with GSL.TO can only have one of the two meanings: Either GSL.TO’s management is completely clueless or Colombia country risk is back in full force. Colombia Sector Overview Chart.
  • LZ – Lubrizol: Chemicals look good here. Sector rotation at its best. Lots of bullish charts within that sector. As long as sector rotation is working like a charm, don’t short this market. Chemicals Sector Overview Chart.

To follow the good principles and not let fear, greed and hope interfere with your trading is tough. You’re swimming upstream against human nature. – Richard Dennis

My public list with all my charts can be viewed here:

Buenas noches.

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