There are converging trendlines evident on the daily chart of gold, and I thought that structure would be worth a closer look.

DJ has been showing weakness throughout the whole week of trading session. Volume is low and does not provide credibility to the rise in index. Refer to my other posting of a bull market correction on the prediction of Dow Jones. Dow Jones has currently loss of 7% and a bull market correction normally takes the index further to 10 - 15% from historical behavior. Hence, there may be more thunderstorms in the days to come before we see a calm weather.

Shanghai Stock Exchange

China is one of the epic centers of this thunderstorm and the tightening of the loan credit by the government has sparked off this selldown. SSE broke the psychological barrier of 3000 level and traded below the 200D MA for the past two weeks. As evident from the chart, the 200D is the immediate resistance for the index and the 200D MA will continue to creep towards 3040-3060 level which will coincide with the support and resistance ( refer to blue encircled zone ) for the index for several months. Hence, i would think that the index will likely consolidate around 3060 and 2920 region in the coming week. On the longer term, the chart pattern resembles a double top ( Adam and Eve ). Eve is the second rounded top. I certainly would not want to see the index to break neckline of this double top pattern. We have to monitor SSE’s development for the following weeks closely for any recovery signals in the weeks ahead.

An example of Adam and Eve double top formation

Hang Seng

Hang Seng has rebounded off 19379 and now testing 20300 which is the 200D MA. As with SSE, there is a high possibility to be trading in a consolidation band zone between 19379 to 20400 and 20900. After all, Hang Seng has been at the forefront of this correction and is now about 15% off its recent peak of 22647. This has been far worse than Dow Jones and SSE for a presumably bull market correction.