Shanghai's SSEC: Uptrend may be broken

Shanghai's SSEC Index may have just broken its accelerated uptrend line, S2-S2 at 4750 on June 19. Is this the end of the Chinese amazing bull run? We will have to wait and see. Shanghai's Stock Exchange seems to be closed today.


Chart 1: SSEC's daily chart as at June 19, 2015 (Source: Stockcharts.com)

As it stands now, SSEC has also broken its immediate horizontal support at 4500-4600. Its next support is at 4000-4100. A breakdown of the accelerated uptrend line as noted above came after persistent bearish divergence in the daily MACD & RSI indicators.


Chart 2: SSEC's weekly chart as at June 19, 2015 (Source: Stockcharts.com) 

SSEC is not alone. Mumbai's BSE Index broke its uptrend line in April and failed to recover above it in May.

 
Chart 3: BSE's weekly chart as at June 19, 2015 (Source: Stockcharts.com)  

Investors can only hope that the correction in SSEC will not be too nasty. The sharp rally in SSEC over the past 12 months has all the hallmarks of a bubble. A mild correction is just what a good doctor would prescribe; anything more could kill the patient.