Changing the trend - or not

THE Shanghai market has developed a major tremor in the trend. Is this a precursor to similar trend disruptions in the DOW, S&P and Nasdaq? Or is the situation in China unique and isolated from the world?

China is not isolated from world markets. It influences world markets and in turn is influenced by them. However, the behaviour of the China market reminds investors of the patterns which signal market collapses. These are a break below a long-term trend line, head and shoulder, and rounding top price patterns. It is the fall below the long-term trend line that is the immediate focus with the Shanghai Index.

The uptrend was defined with a straight-edge trend line. This trend line has provided a significant support feature and a potential rally rebound point. This is the first time since May that the index has dropped below the trend line. This is a significant trend-break signal.