### POV: SHANGHAI COMP'S RUNAWAY.......>

CHINA STOCKS: ### POV: SHANGHAI COMP'S RUNAWAY RALLY FACES KEY RESISTANCE

- The Shanghai Comp. sits ~31% off of the early Jan lows. This week's leg higher

has seen the index take out the prior YtD peak on the back of stronger than exp.

Chinese PMI data, the implementation of the latest round of fiscal easing from

the Chinese gov't, increased optimism re: U.S.-China trade matters & growing

speculation of an impending RRR cut from PBoC.

- The rally now faces stern resistance. 1st, psychological resistance at 3,200.

A break would open up double top resistance from Apr/May '18 around 3,220. This

is followed by the 22 Mar '18 low at 3,242.76, which represents the base of the

gap lower. A clean break here would allow bulls to focus on the 76.4% of the

retracement move from the '18 high to the YtD low, located at 3,316.55, followed

by double top resistance from Feb/Mar '18 at 3,335.99. Increased volume has

supported the run higher, although intraday volume in Shanghai stocks is back

from Mar highs. The 14-Day RSI is hovering just shy of overbought, currently

66.92, after a foray above the key 70 threshold in Feb-Mar.

- The latest round of Sino-U.S. trade talks provides immediate headline risk.