The Shanghai index topped in late 2007, after which it crashed in a dramatic fashion. This also matches the crude oil peak very well, with that secondary peak never reaching new highs since. I see the crash and counter-rally containing an inverted zigzag. The long trend line from the 1996 bottom did not hold back the bearish mood that is starting to hit stock markets around the world.
Any bear market rally always retraces itself, back to the point of origin, which would be the (A) wave in Intermediate degree. Of course, it can go much lower as well. We also have one crazy wedge that can give us a clue that the Shanghai index is going down. I show a 1-2 wave count in Minor degree, but that can also be the 4th wave already, due to its length in time it took to counter rally.
We will know more as we get further along in the year, as once a trend resumes it will not stop until it is in an oversold position again. A zigzag decline leading into a Primary degree “A” would definitely give us another bullish phase as another bear market rally, which can be an inverted flat. I have no COT, or MV report available to use, but all the North American markets do. When the commercial hedgers all turn net long, then the Shanghai will also rally.
Mark Hulbert posted a great article that will give a few people something to think about.