Shanghai had another good week – most of it on Friday. After 2 years, it has broken its downtrend line on good volume, therefore finally breaking out of the falling wedge pattern. While there is always a possibility for a retest of the recent lows, it looks like the trend has changed. The theory of the falling wedge is a gain back to the top of the wedge. In Shanghai's case this is about a 50% gain. It is unlikely to do much better because there is a lot of resistance after that. Also it's only 5 years past its bubble (600% gain in 2 years), so a lot of time must pass before it is fully healed. For example, Nasdaq is still a long way from its Y2K bubble high, and gold required 30 years to recover from its bubble.

Venture is well correlated to Shanghai, but sadly, it would require a 50% gain just to get back to February's high, and another 50% from there to get back to last year's March high. While these kind of moves are always possible in juniors, it just seems like a tough slog. Still, a Santa rally seems very likely – I just don't know how far it will go.

One final rant: Last year's Santa rally was notable in that there was a modest rise in most juniors, but very few real pops that happened in prior years. I didn't understand why until I read the Kaiser blog Chris recently posted. High-speed computer systems hooked up to Venture are taking advantage of stocks that pop up by selling / shorting the moves. If this year's rally has a similar signature, I'll be out of the junior sector by the end of January. High-speed trading is bad enough in a liquid market, but when applied to the illiquid Venture, it is disastrous for individual investors - there's just no way to compete.