The Shanghai Composite’s 3.7 per cent rally in five days is impressive in its own right, but the key from a technical perspective is that Hong Kong’s Hang Seng and Taiwan’s Taiex are making, or hovering close to, new highs. Technically it is important that linked indices confirm each other, as laid out by Charles Dow when he invented the Dow Jones averages. At 2,126 points, the Shanghai Composite is almost at this year’s highest weekly close and its break above trend line resistance is important. If the 10-week moving average crosses above the 40-week one to form a “Golden Cross”, a further rally to 2,220 would be likely.

Nicole Elliott is a technical analyst