Elliott Wave Analysis of the Shanghai Composite Index (SSE) by Sid from ElliottWavePredictions.com

Elliott Wave Analysis of the Shanghai Composite Index (SSE) by Sid from ElliottWavePredictions.com. Click on the chart twice to enlarge.

The Shanghai composite Index is showing a number of technical reasons why it may have bottomed last week. For one thing, Wave C black appears to have turned after reaching exact equality with wave A black, a very common relationship. Also, when using Elliott’s triangle measuring technique, the thrust from the blue wave 4 triangle appears to have bounced exactly off of the thrust target exactly to the tick. Additionally, last week’s candle spanned nearly a 6% gain from low to high, and is a clear weekly bullish engulfing candle. If the long term triangle scenario pictured above is correct, the Shanghai Composite is now due for a significant bull run, with a projected gain of over 40% from Wednesday’s low, the eventual upside target being the .618 retracement of the entirety of Wave C (burgundy) of the triangle.

This development could easily kindle profit-taking in US and European equities, as the smart money reinvests portions of their profits from mature bull markets into instruments with greater potential to rally from significantly oversold junctures.