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There are two salient technical features that jump out of our comparison chart of the Shanghai Composite and S&P 500 daily charts: 1) the powerful July upmove in the Shanghai that has hurdled May-June resistance and now appears to be poised to confront the declining 200 DMA at 2800; and 2) the close proximity of all the relevant moving averages in the SPX clustered in the vicinity of 1094/95.
In my experience, when the MA's are all in and around the same price, a surprisingly big move usually emerges from such a technical confluence. Which way from here?
Since the moving averages are converging in the aftermath of a mostly negative corrective period from April to July, my suspicion is that a thrust in one direction or other argues for a resolution to the upside. That suspicion, coupled with the economic implications associated with the powerful upmove in the China market, bode well for the near-term direction of the SPX.
Mike Paulenoff is author of www.MPTrader.com, a real-time diary of his technical analysis & trade alerts on ETFs for precious metals, energy, currencies, and an array of equity indices and sectors, including international markets, plus key ETF component stocks in sectors like technology, mining, and banking. Sign up for a Free 15-day Trial!
