It continues to amaze us how everyone is talking about a shift in economic influence to the east but few seem that interested in the behaviour of the stock market of the economic powerhouse of the world, i.e. China. Everyone seems obsessed by the behaviour of the S&P 500 and Russell 2000! Let us remind you – the Shanghai Composite led world equity markets out of the bear market late last year and we suspect that it will lead markets into the next bearish phase. So we think that punters should pay a little more than random attention to what is happening in the Chinese stock market.

Anyway, down to business! It appears that the Shanghai composite has let off sufficient steam and is now poised to make a new multi-week high, perhaps even before Christmas. What makes us confident that a multi-week high will be achieved? Take careful note of the two charts below especially the bottom chart! Chinese small caps made a multi-week high today. The primary bull trend in the Chinese stock market has been confirmed and we suspect in doing so the primary bull trend in world equity markets has also being reaffirmed!

Some may argue that the Chinese stock market is overheated and overvalued, perhaps you are right, who are we to argue with your beliefs, and equally who are we to argue with the behaviour of the two charts above!