(Dec 20): It is getting too cold for tourists in Xi’an, so the pressure has come off the terracot- ta warriors. However, the cold does not stop the nightly flood of visitors to the Great Tang Mall stretching south from the Big Wild Goose pagoda, where the first Buddhist scripture in China was translated for the Tang dynasty court. The mall stretches over two city blocks and is dominated by stately statues of former emperors and Tang poets such as Li Bai and Du Fu.
Unashamedly designed for tourists, it also captures a Chinese cultural outlook. In mid-December, the throngs of Xi’an residents, free from tourists, provide some perspectives that are easily overlooked by visitors.
This night, at the southern end of the mall, the giant LED screen is showing what many foreigners would class as a propaganda film. It extols the virtues of Xi’an and the progress it is making as a terminus of both the ancient and new Silk Road. It is outright publicity for the inland rail port and free trade zone.
The lengthy film is not one that Westerners, in particular, would watch voluntarily.
And yet it attracts a significantly large crowd. This type of advertising is a hangover from the time when illiteracy levels were high. The new Maoist government, in particular, became skilled at using graphic images to deliver its messages of reform, progress and revolution. This advertising propaganda tradition endures, and it continues to fulfil its role of informing people.
But make no mistake; there is a genuine pride in the achievements shown in the film. When doing business in China, we would do well to remember these sentiments.
Evident too is a growing pride in Chinese history and traditions. Perhaps it is more obvious in the Tang mall because Xi’an, once known as Chang’an, was the capital of the Tang Dynasty, which rivalled the Italian renaissance in terms of wealth and sophistication.
In the crowd are many women wearing hired traditional Han dresses and cloaks with modern sneakers peeping out from under the hem of long dresses. The hire business does well with four shops here specialising not just in clothing, but hairstyles and jewellery. Often, the young women are accompanied by their boyfriends, also dressed in Tang Dynasty style. They pause, sipping Coke, or snacking on Grandpa Li’s steamed rice cakes, as they watch a clas- sical violin quartet, a modern K-pop singer, or listen to a Mongolian group playing a morin khuur – a horsehead fiddle while the first flakes of snow drift in the cold wind.
This is a celebration of China, but it is not a nationalism that demands others should emulate China. It is a celebration of pride and a statement of respect deserved and delivered. The days when something foreign automatically tus are long past. The new status labels read “Designed and made in China – with pride”. This is a changed marketplace, accelerated by trade wars. It is an unintended consequence and those doing business in China need to take notice.
Technical outlook for the Shanghai market
The Shanghai Index rally has moved rapidly above the three primary resistance levels and is testing the strength of the fourth resistance feature. This is a very rapid breakout with a high probability of a retreat and consolidation. The behaviour of the consolidation will assist in setting the position of the trendlines used to manage this potential new uptrend.
The first resistance feature is the long-term support and resistance level near 2,920. This was decisively broken with a gap-up move. The second is the value of the upper edge of the long-term Guppy Multiple Moving Average (GMMA). The rally has also gapped above this feature. The third resistance feature was the value of the downtrend line. This has proven to be a minor resistance feature and the index moved strongly above this level. These are all characteristics of a strong rally, but that does not necessarily make for a strong trend.
The key resistance level is the long-term resistance level near 3,040. This is the upper edge of the long-term trading band that has dominated the Shanghai market since July. A sustained move above this level is very bullish and has an upside target near 3,120. This target could be achieved very rapidly, but investors will be alert for consolidation behaviour.
The Shanghai index has a characteristic of very fast rallies followed by consolidation periods. This is seen in the market behaviour between January and March this year.
The GMMA indicator is used to assess the strength of the trend. The long term GMMA shows rapid compression and is moving upwards. When the long-term GMMA expands, it shows good investor support for the developing uptrend.
The short-term GMMA indicates the way traders are thinking. This group has moved up rapidly and developed a good separation. This confirms strong support from traders. The values of the short-term GMMA are all above the upper edge of the long-term GMMA. This is a fast and powerful breakout.
Although the down-sloping triangle pattern is usually a bearish pattern, the strong and decisive breakout above the downtrend line now invalidates the triangle pattern.
The main focus now is on the way trend strength develops because this is necessary for a long-term sustainable uptrend. The Shanghai Index can move rapidly to develop a 500-point rise. This is good for traders, but a fast rise of this nature does not support a sustainable longer-term uptrend. Investors watch the consolidation behaviour for evidence of a sustainable long-term trend.
Daryl Guppy is an international financial technical analysis expert and special consultant to AxiCorp. He has provided weekly Shanghai Index analysis for mainland Chinese media for more than a decade. Guppy appears regularly on CNBC Asia and is known as ‘The Chart Man’. He is a national board member of the Australia China Business Council
