Chart of the day: Does Shanghai still have room to run?

Record trading volume that had lifted the Shanghai Composite Index above 3,000 points for the first time in four years has also tipped the market into overbought territory. After yesterday's bruising 5.4 per cent fall, the question is whether bullish momentum remains intact. A moving average convergence/divergence indicator at its most positive since 2007 suggests the rally has the legs to run past the 2009 high above 3,400 points as part of a long-term normalisation process that gets the market past the distortion caused by the 2007 boom-bust. Sentiment may be super-sensitive short term, but the technicals are clear.