With all the hand wringing about the DJIA slumping 800 points or 3% Tuesday for various and sundry reasons, I think a quick look at the China A-Shares seems like a good idea to me. Hey, we're all connected as they say.
In this daily bar chart of the FTSE China A50 Index, below, I can see that the index made a peak in January and a decline to July. Prices have trended sideways since July and dips below 11,000 have not been long sustained.
Prices have crossed above and below the shorter 50-day simple moving average line the past five months. The longer 200-day average line has been bearish since late June when its slope went negative.
In the middle panel we can see that price momentum has been making higher lows since July while prices have made equal lows. This difference between the price action and the indicator is a bullish divergence and points to an eventual upside move.
In the lower panel is the trend-following Moving Average Convergence Divergence (MACD) oscillator which is close to crossing above the zero line for an outright go long signal.
In this weekly bar chart of the FTSE China A50 Index, below, we can see that prices are holding above the late 2016/early 2017 resistance zone in the 10,500-10,000 area.
Prices are below the declining 40-week moving average line but a rally above 12,000 will be bullish and break the average line.
The weekly MACD oscillator gave a cover shorts buy signal in September but remains below the zero line and a more bullish signal.
Bottom line: If there is one thing I have learned about the markets since watching them since 1964 - greed is greatest at tops and fear is the greatest at bottoms. With bond prices spiking and equities in search of a parachute on Tuesday, I think we'll come back from the brink.