The Shanghai Composite remains in "spring position" ahead of a potential upside breakout from its May-September base pattern.

Let's notice that the recent price action of both the SH COMP and the S&P 500 is starting to look similar -- that is, a rally at the end of August into early September followed by a sideways, bullish consolidation area that should resolve itself to the upside in a thrust towards a test of the 200 DMA (2763) in the SH COMP and a confrontation with the June-Aug. highs (1129/31) in the SPX.

Still, from my technical perspective, the China Index is leading the SPX. If the SH COMP hurdles and sustains above 2705, then it should begin to fulfill the upside potential off of its May-Sept. base pattern -- at 2930/80 -- which should provide support for upside continuation in the SPX as well.

 

Mike Paulenoff is a 26-year veteran of the financial markets and author of MPTrader.com.