Published February 8th, 2018 & validated May 13th, 2018

We turn bearish for Chinese equities short term. The bigger picture is favoring a trading approach relative to a buy-and-hold strategy.

Chinese equities are in a secular cycle correction. A sideways trending market with violent swings describes the character of the trend. We forecast this situation to persist for the next years. Eventually, the corrective pattern will resolve to the upside.

Short-Term Shanghai Composite Elliott Wave Analysis

Published April 2nd, 2018 & amended 13th May 2018 (chart only)

The bulls couldn’t lift Chinese equities higher. A swift correction turned the entire market action since January 2016 into a complex X-wave of intermediate degree. It retraced a Fibonacci 38.% of the previous drop in wave (W).

The Y-wave of minor degree started in May 2017. It still needs confirmation that it is done. The drop off the January 26th high looks strong. It took price action outside of the pale blue trend channel. A flat pattern may be still building in order to correct this drop.

Medium Term Shanghai Composite Elliott Wave Analysis

Published February 8th, 2018

It was difficult to earn money with Chinese stocks over the last decade. The Shanghai Composite index went into a sideways pattern after reaching its all-time high in 2008. The entire structure behaved violently. Its subwaves were typically sharp and strong. Our primary wave A°, as well as intermediate wave (W) labels, had the characteristics of market crashes.

The triangle is about 60%-70% percent from its end with respect to time. Moreover, the bottom is likely around the 2008 low. It will not be retested within the triangle unless the triangle morphs into a barrier triangle. Last but not least, primary wave C appears to trace out a complex structure. This fits very well into Elliott waves guidelines.

Our Shanghai Composite Elliott wave analysis concludes more sideways action for the years ahead. The triangle will eventually resolve to the upside. However, we project this to occur past 2020.

Technical Analysis