Technicals - Shanghai index further downside potential....US market technicals remain negative

The Shanghai Composite index close below the 2930 major support level yesterday indicates the potential for a further substantial decline. The rally today has not changed this negative technical view. Major subsequent support is now located at 2760. The surge on the US market overnight has not altered the negative technical view which has been in place since late June, when the Dow Jones and S&P500 indices generated technical sell signals. Over the last week the technical sell signal minimum downside target levels have been reached on the Nikkei, DAX, CAC and the 3 key US indices, with the FTSE and Hang Seng having reached target levels earlier. The global index trend remains negative. A consolidation phase above recent lows will be required if there is to be the potential for technical base forming to occur.