China released some economic data this morning with Q2 GDP growth dropping to 7.6% from from 8.1% in Q1 according to the National Bureau of Statistics, the slowest growth in three years. Industrial output growth also slowed to 9.5% in June from 9.5% in May.
J.C. Parets over at All Star Charts did a nice job pulling out this weekly line chart of China’s Shanghai index last night and he discussed the implications the stock exchange is currently in pertaining to its long-term trendlines.
From All Star Charts:
The current prices are near the 2001 highs, right before the Shanghai Composite got cut in half. There is memory at this price. That former resistance adds additional support at these levels.
The consequences of a breakdown below long-term support would really be damaging to this chart, and paints a poor picture for China. But I think there is an overwhelming amount of support where the higher probability move is a bounce. And a breakout above an almost 5-year down trendline could be explosive.
I agree with J.C. in that China has approached a fork in the road, if this trendline that goes back to 1994 breaks then we could see some serious weakness out of not only the Asian markets but the global markets as a whole. However with this much support, it’d be surprising to see the price action slice through support like hot butter on the first approach.
Source: This is The China Chart to Watch (All Star Charts)
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