SHANGHAI COMPOSITE FORMS YET ANOTHER LOWER HIGH -- COAL ETF AND INDEX TURN SHARPLY LOWER -- COPPER MINERS ETF BREAKS SUPPORT -- STEEL ETF COMPLETES THREE-POINT REVERSAL -- US STEEL AND NUCOR FORGE LOWER HIGHS

SHANGHAI COMPOSITE FORMS YET ANOTHER LOWER HIGH... Link for today's video. It is tempting to suggest that the Shanghai Composite ($SSEC) is testing a major support zone, but the trend is clearly down and support levels are not expected to hold in downtrends. Chart 1 shows the index with a series of lower highs extending all the way back to July 2009. The downtrend slowed as the index bounced off the 2000 area in late 2012, mid 2013 and now early 2014. Each of these bounces, however, resulted in a lower high and the downtrend was never broken. With a close at 1999 on Monday, the index is once again toying with the prior lows. At this point, I would simply lower resistance to the 2200 area and remain bearish unless there is a breakout here. The trend line zone extending down from the April 2011 high and February 2014 high combine to mark resistance here. The indicator window shows the price relative in a steady downtrend as the Shanghai Composite underperforms the S&P 500.

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Chart 1

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Chart 2

Chart 2 shows the Hang Seng Composite ($HSI) performing better than the Shanghai Composite over the last five years, but still underperforming the S&P 500. The Hang Seng has been working its way higher since October 2011. Upside momentum stalled in 2011 as the index hit resistance in the 24000 area at the beginning and end of the year. The index, however, has yet to break down and follow the Shanghai Composite lower. The October 2011 trend line zone and February low mark key support in the 21000-21500 area, a break of which would be long-term bearish. Note that the Shanghai Composite is a broad index that tracks performance for A and B shares on the Shanghai stock exchange. The Hang Seng Composite is a fifty stock index with a heavy weighting in the finance and real estate. HSBC is the biggest component.

COAL ETF AND INDEX TURN SHARPLY LOWER... Weakness in Chinese stocks is weighing on several industry groups in the materials sector. Chart 3 shows the Coal ETF (KOL) reversing at its 200-day moving average on Friday and continuing lower on Monday. Even when the ETF bounced in February, it still underperformed the market and its StockCharts Technical Rank (SCTR) has not been above 10 since the first week of January. Chart 4 shows the DJ US Coal Index ($DJUSCL) peaking in November and forming a series of lower highs the last four months. The trend is down and this trend looks set to continue with the reversal over the last two days. Downtrend resistance is set at 140.

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Chart 3

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Chart 4

COPPER MINERS ETF BREAKS SUPPORT... Chart 5 shows the Copper Miners ETF (COPX) with a choppy zigzag advance from mid December to early March. After hitting a three month high last week, the ETF abruptly reversed course and broke support with a sharp decline the last two days. A lower high has now formed and it looks like the bigger downtrend is taking over.

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Chart 5

Chart 6 shows Spot Copper ($COPPER) breaking support on Friday and hitting the $3.05 level on Monday. Copper is leading industrial metals lower. Chart 7 shows the Base Metals ETF (DBB) forming another lower high in early March and moving sharply lower the last two days. The downtrend is affirmed and resistance is set in the 16.60-16.80 zone.

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Chart 6

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Chart 7

STEEL ETF COMPLETES THREE-POINT REVERSAL... Chart 8 shows the Steel ETF (SLX) reversing its uptrend with a three point reversal, which can be compared to the three point u-turn in a car. First, SLX broke support in late January with a sharp decline. Second, the ETF rebounded and fell short of its prior high. Third, the ETF confirmed this lower high with a sharp decline the last three weeks. The trend line zone and early March high combine to mark resistance in the 46-46.5 area. The indicator window shows the SCTR moving below 10 as SLX underperforms within our ETF universe.

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Chart 8

US STEEL AND NUCOR FORGE LOWER HIGHS... Chart 9 shows US Steel (X) trending lower this year and breaking flag support today. Chartists can use the trend line zone and flag high to mark downtrend resistance in the 25-26 zone. Chart 10 shows Nucor (NUE) breaking support in mid January, hitting resistance at the 62% retracement twice and moving lower the last three days. Notice that downside volume increased on Thursday-Friday. Even though NUE failed at 62%, keep in mind the that the S&P 500 remains in a long-term uptrend and break above last week's high would quite bullish.

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Chart 9

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Chart 10

BOLLINGER BANDS NARROW AGAIN FOR GOLD MINERS ETF ... The Gold Miners ETF (GDX) has been one of the best performers in 2014 with a 20+ percent year-to-date gain. It is an impressive gain, but the bigger trend for GDX remains down and the ETF at an interesting retracement level on the daily chart. Chart 11 shows GDX hitting a new low near 20 in December and then surging above 26 in February. The blue horizontal lines show the one-year range (March to February) and GDX has yet to recoup even half of this loss. The 50-62% retracement zone coincides with long-term resistance in the 30-31 area.

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Chart 11

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Chart 12

Chart 12 shows GDX consolidating with a tight four week range on the daily chart. The indicator window shows BandWidth dipping to its lowest level since the first week of January. A decline in BandWidth means the Bollinger Bands are narrowing. The first narrowing led to the early January breakout and the second led to the early February pennant breakout. GDX is currently forming a pennant in the key retracement zone. Pennants are typically bullish continuation patterns and a breakout would signal another continuation higher, and target a move to the 30-31 area. GDX is, however, in a bigger downtrend and at resistance. Therefore, be on guard for a support break at 25.5 that would suggest a bearish reversal.