MARKETS SPECTATOR: China bull tease

The last two weeks have seen a dramatic reversal in the Shanghai Composite Index downtrend which bodes well for Australian materials.

The chart below shows the Shanghai Composite Index is looking very encouraging indeed. The last two weeks has seen a dramatic reversal in the long-term downtrend, with the index surging to break up through the major resistance level as well as the long-term downtrend line. It looks like the bulls have finally awoken.

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Source: Iress

On the shorter-term chart below, we can see that the index is consolidating very nicely on top of the major resistance level, which is now strong support. The fact that it is consolidating above the major resistance level indicates a lack of genuine sellers in the market, which bodes well for further upside in the short- to medium-term.

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Source: Iress

This outperformance in Shanghai has resulted in a very bullish breakout on the S&P/ASX 200 materials sector below. This paints a very encouraging picture for the New Year as money continues to flow back towards the mining sector.

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Source: Iress