SSE Market is Trapped in a Down Channel

Since November 12, 2011, the Shanghai Stock Exchange composite index has been trapped in a downward channel. It tried to break away last week but was not successful. However, the time seems right now for it to make a second attempt and there is a high chance that it will succeed this time.
However, it all depends on the political development in Libya and Middle East. After Tunisia set a trend in toppling the government, many Muslim countries in the region are taking the cue and engaged in anti-governmental protests. The worrying thing in China is the Jasmin Revolution. This supposedly peaceful protest to be organized last week was quickly pressed down by the Chinese authority. Quick action ensure stability. The China government is under pressure to address the the issue of income gap. There is a major disconnect between the city folks and the village peasants. The income gap is huge and potentially dangerous.
If the SSE composite can break the resistant trend line, there will be hope to turn around. Otherwise, it will trade within the channel.

STI staged a strong rebounce Feb 25, 2011

After 2-3 weeks of corrections, STI and Asian stocks in general staged a strong re-bounce. It sprung back 1.8% and closed at 3025. That was a week when STI breaches 3000 over the last 6 months. It was also the first time a major upward movement seen after 3 weeks of near daily sell down.

Is this just a dead-cat bounce? From the strength of it, it seems to be a credible force. Its volume was healthy for any upward movement. However, given the backdrop of high volume sell down over the last few days, the volume registered may not seem high. This is a tricky situation. Even though the move seems to come from a credible force, there is overhanging worries. This is were Technical Analysis fails. In the end, we will need to see 2 main factors: one, the potential political turmoil in Asia particularly in China due to uprising in Africa and Middle East. The Jasmine Revolution movement has to be contained before it germinates. Two, the US economy recovery. Will the QE2 be pulled off the table sooner than expected? The pulling off of liquidity will certainly dent the market. Early next week will have to be closely watched. The Libya unrest and US Fed announcements will certain play the main role in determining where the market is heading.

From the look of it, this is a potential pivot point of the market.