The Shanghai Composite Index has steadily fallen from around the 4,200 mark to roughly 3,800 points today, making a market that was originally enduring the sweltering heat of midsummer suddenly feel a chill.

But this round of decline has not been without warning signs. As the saying goes, “a storm rises from the tips of green duckweed.” Weekly technical indicators had already repeatedly issued risk signals.
The first time was in January 2026. After the Shanghai Composite Index moved above 4,100 points, the price continued rising, but the technical indicators began to weaken, forming a clear bearish top divergence.
The second time was in early May, when the index made another new high at 4,258 points, yet the technical indicators kept sliding lower, deepening the divergence further. The index kept hitting new highs while momentum kept deteriorating—this in itself is a warning sign that should not be ignored.
That the market dragged on until now for a rapid drop does not mean the risk has disappeared; it’s more like “a large ship is hard to turn.” The main institutional players need time to shake repeatedly at high levels and gradually distribute their holdings. From the outside, the market appears stable, but internally the structure continues to weaken.
Only after the distribution of positions is nearly complete does the index lose support, causing the risks accumulated earlier to be released in a concentrated burst. Today’s selloff is nothing more than the final settlement of the prior severe bearish top divergence—reaching the stage of “when the map runs out, the dagger is revealed.”
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