The Shanghai Composite has been on a tear lately, extending its melt-up trend. Despite the latest China bull run being barely on the radar of investors and analysts, the index’s upside potential remains significant. While some may point to overbought RSI levels as a sign of a potential correction, history has shown that overbought conditions can persist for longer than expected.

The Shanghai Composite’s latest rally has been nothing short of remarkable, with the index surging 30% in just three months. This rapid growth has caught many off guard, including some analysts who had previously predicted a more gradual rise. The index’s sudden and sustained momentum has led to a significant increase in buying interest, driving prices higher and higher.

One of the key factors driving this rally is China’s ongoing economic recovery. After a period of slow growth, China’s economy has shown signs of picking up steam once again, with GDP growth rates rising and investor confidence improving. This improved economic outlook has led to increased optimism among investors, who are now more confident in the country’s prospects for future growth.

Another factor contributing to the Shanghai Composite’s melt-up is the recent relaxation of monetary policy by China’s central bank. The People’s Bank of China has cut interest rates and lowered the reserve requirement for banks, providing them with more liquidity to lend to businesses and consumers. This has helped to boost economic activity and drive demand for stocks, further fueling the index’s upside potential.

Despite the Shanghai Composite’s impressive gains, some analysts have expressed concern about overbought RSI levels. The Relative Strength Index (RSI) is a popular technical indicator that measures the magnitude of recent price changes to determine overbought or oversold conditions. While it is true that RSI levels are stretched at the moment, history has shown that overbought conditions can persist for longer than expected. In fact, during previous bull runs in China, overbought RSI levels have often signaled a prolonged upside trend.