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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
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N.B.
* The content in my articles is time-sensitive. Each one shows the date and time (New York ET) that I publish them. By the time you read them, market conditions may be quite different than that which is described in my posts, and upon which my analyses are based at that time.
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Monday, February 03, 2020

China Markets Plunge

Here's a snapshot of CNBC's world market heat map as at 1:25 am ET Monday February 03.

North and South American markets are still closed from Friday. Of particular note is China's Shanghai Index (SSEC)...down 8%...presumably on worries related to the coronavirus.

However, it seems to me that there may be systemic problems that have been hidden by China for years with respect to their real (sustainable) economic prowess, or lack thereof...based on what the following chart and analysis reveal.



Source: Reuters.com

The following monthly chart of the SSEC shows this overnight catastrophic drop.

Price has been trapped in a large sideways trading range between 3000 and 2500 since mid-2018...and is now precariously suspended in the middle of this zone.

Essentially, it's had difficulty getting any sustained traction above 3000 since it plunged below in June 2008. When it did manage to break through in December 2014, it was followed by a volatile, parabolic rise and fall back to its current level by the end of 2015. Successive attempts to break out have been increasingly feeble and short-lived.

It's clear, from a charting perspective, that China has been struggling to regain its heady glory days as a stable global economic leader since its bottoming in October 2008, following the global financial crisis.

What's unclear to me, at this time, is when that slump will finally end.

For clues on when this particular rout may be stemmed, I've shown the input value on the ATR (Average True Range) and ROC (Rate-of-change) technical indicators as one period (one month). At the moment, neither of these has spiked to an extreme level, as did occur following the 2008 financial crisis crash and, then, after another drop through to January 2016.

Watch for extreme spikes to form on both of these indicators as a potential sign that a turnaround in market sentiment may, finally, be on the way.

A drop and hold below 2500 could see price plunge further to 2000, or lower, in short order.