Don't cry for Shanghai

One day after it has rocked all the regional stock markets, the Shanghai Stock Exchange has put in a sharp rise of 76 points (or, 2.38%) to 3249 as at 11.30 p.m. ET (see Chart 1 below).


Chart 1: SSECI's intra-day chart as at 11.30 p.m. ET

What does this mean? From Chart 2 below, we can see that SSECI is trapped in a consolidating pattern (in the shape of an ascending wedge). A break above 3200 would signal the continuation of its prior uptrend, which has to be confirmed over the next few days to see whether this breakout is genuine or otherwise. Nevertheless, it is a humbling experience to see that the direction of a stock market cannot be changed or controlled by government's intervention, even one as omnipotent as the Chinese government.


Chart 2: SSECI's daily chart as at March 28

The Chinese government has been feeling very uneasy about the state of its economy & the many bubbles, including the stock market bubble. You can read more about this in a recent article by Stephen Roach of Morgan Stanley (here).