SINGAPORE (Mar 26): President of the United States and Commander in Chief. A heartbeat away from the presidency, the vice-president. We are all very familiar with the US political structure and what it would mean if the US president declared himself president for an unlimited time even though the convention of a maximum of two terms was introduced only in 1951 as the 22nd amendment to the Constitution.

When it comes to the Chinese political structure, we are less informed and, as a result, more easily frightened.

China’s president has three titles. The first is president of the People’s Republic of China. The second is chairman of the Central Military Commission, that is, commander in chief. The third title is general secretary of the Chinese Communist Party, and this is by far the most important position.

The title of president is the least important of the roles because it is largely a ceremonial position. The president is bound by China’s constitution. The head of the Chinese Communist Party is governed by the Party constitution.

In the period after the death of Mao Zedong, the presidency was redesigned to ensure that China had a titular leader and the position was not held by the actual ruler of China. The position was held as a reward for high-ranking senior officials. They were put out to grass essentially.

As China’s international engagement developed, the position of president changed. It was okay for the head of the Communist Party to meet with the heads of other Communist states as equals. Western presidents expected to meet with presidents of equal standing, so the presidency evolved and the position was combined with the head of the Central Military Commission and the head of the Chinese Communist Party.

The term limits on the presidency were changed two weeks ago, partly to make them consistent with the term limits for the other two titles. The party leader and military leader have no term limits.

This is why in the past, a leader such as Jiang Zemin was able to retain his power as commander in chief after his formal retirement from his role as president and general secretary of the party.

The move to give the president an unlimited term breaks with recent convention, but is consistent with the same unlimited terms of the positions of general secretary and commander in chief.

It is not the same as giving an unlimited term of office to the US president, although the commentaries make it appear as if this is the case.

However, the removal of term limits for the Chinese president removes one of the few checks and balances of power that were imbedded in the State constitution. It removes the ability of another body to place constraints on the behaviour of the leader.

Removing term limits also raises questions about how power will ultimately be transferred to the next generation of leaders.

“President for life” has a particular ring to it to Westerners, but the Chinese president has very few delegated direct powers. Like any good politician, the strength of the president revolves around his ability to wangle deals. For US President Donald Trump, it is a constant fight with Congress and the Senate. For President Xi Jinping, it is a battle within the Party collective leadership group. It is not a bare-all, public West Wing-style drama, but it is just as intense.

Understanding the relationship between the three roles of the Chinese president helps explain why the Chinese market reaction has been muted.

<strong>Technical outlook for the Shanghai market</strong>

The trend test and retest pattern continues with the Shanghai Index. This is often part of the development of a major trend change. The pattern of behaviour is seen in the Guppy Multiple Moving Average (GMMA) indicator. It is a three-part pattern, although each part may contain several rallies and retreats.

The first part, or test, is when a rally ap proaches the lower edge of the long-term GMMA and then retreats. This is a compression in the short-term GMMA. This happened on Feb 26.

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The second part of the test pattern is a rebound rally that penetrates the long-term GMMA before retreating from this resistance feature. The short-term GMMA also turns up and touches the lower edge of the long-term GMMA. This rebound rally and retreat developed. The retreat tested support near 3,260 at the lower edge of the trading consolidation band. The rebound rally from this level is weak, so this second test-andretest feature may make two rally attempts before moving above the upper edge of the long-term GMMA.

The third part of the test pattern is a new rebound rally that moves above the upper edge of the long-term GMMA before developing a new retreat that uses the long-term GMMA as a support level. Usually, the longterm GMMA is also turning up and developing some compression. The pattern is confirmed with a new rebound rally that takes the short-term GMMA above the long-term GMMA. Investors wait for this development and use it as a signal to join the developing uptrend.

The current retreat has two support fea tures. The first support feature is the upper edge of the trading consolidation band near 3,290. The position of trend line A is adjusted to include the most lows. The trend line position will be confirmed by future rally-and-retreat behaviour.

The second support feature is the lower edge of the trading consolidation band near 3,260. The retreat to this level, and a rebound, has triggered the adjustment in the position of the up-sloping trend line. The index successfully tested this area as a support level.

There are three key resistance features for any rally rebound. The first is the lower edge of the long-term GMMA, currently near 3,300.

The second is the relatively weak level near 3,360. This level will possibly offer very little resistance when the market rebounds.

The third is near 3,440. This is the value of a long-term support-and-resistance level.

<i>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.</i>

Longer presidential terms do not disrupt market

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