As we warned in April, things would become very unsteady if the Shanghai Composite Index rose above 4,500 points and we would consider reducing exposure. Last week's move underlines its vulnerability with a shooting star potential top on volume as high as it was five weeks ago (but under April's record). The high at 4,986 points, a whisker from the psychological 5,000-point level, is also a 75 per cent retracement from 2007's high to 2008's low and a natural place to pause. The jury, however, is still out because the index managed to hold trend-line support on the daily chart and the Ichimoku moving averages and cloud remain bullish. Investors should proceed with great care after four months of very strong gains.
