Downside in SSEC Continues to Accelerate; Breakdown from Pennant Pattern at Hand

Last night the Shanghai Composite (SSEC) shed nearly 240 bps on the back of various Chinese macro data points.

This comes on the heels of other recent weakness in the SSEC – on 6/25 we noted that the index had witnessed two straight days of 100+ bps declines and was on the cusp of breaking down from a long-term pennant consolidation pattern in the chart below and that similar break-downs in the past had come at the beginning of major declines in the SPX.

We’ve recreated the chart above to include last night’s ~240 bps decline below.

It now appears as if the SSEC has decisively broken below a multi-year pennant pattern.

As the first chart above suggests, break-downs from smaller/shorter patterns in the SSEC in the past few years have coincided with material declines in the SPX and general global “risk-off” sentiment.

Continue to keep an eye on this country and index – more downside here is likely bearish for risk assets given China has been the marginal driver of global growth over the past decade-plus.

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