The Shanghai Composite is sending warning signals suggesting there is more left in this correction. Good supports come in around 4,100 which is over 10% away. The danger is a break below there opens the way towards the 3,050-3,100 area.
The Hang Seng Index may follow suit with a break below 27,191 opening the way towards 25,000-25,850
A continued correction in the Shanghai Composite would likely, in our view, spill over to the Hang Seng
The Hang Seng Index may be setting up for a double top which is confirmed with a break below the neckline at 27,191. If confirmed, the double top would target 25,850. Just below there is the 25,000-25,360 support area which encompasses the 2010 and 2014 highs.
Weekly momentum has already turned lower from stretched levels suggesting this recent rally is running out of steam