The Shanghai A Shares Index has been referred to as a "casino market" for its long history of going coast to coast ... way up and then way down. On Wednesday, it hit a new floor.

In fact, we saw the biggest percentage decrease in the Shanghai Composite since last winter, according to the Wall Street Journal. The benchmark dropped nearly 8% at one point in the day, before settling with around a 5% loss in the session. Even worse, volume set new record highs on growing concerns about weak corporate earnings and swelling government loan amounts. Slumping commodity prices also weighed on the market.

After yesterday's sell-off, the Shanghai A Shares Index pulled back to the 3350 mark off its recent 3600 peak. And it's very possible a further retracement to the 3000 level is coming. In fact, based on purely technical factors, I'm watching to see if the iShares FTSE/China 25 ETF (NYSEArca: FXI) could see a pullback to the $35-$37 per-share range.

And if the "casino markets" go into a more prolonged decline, $34 is a low point to watch for ... and, in my opinion, a place to consider bolstering or initiating your long positions in the ETF.

Remaining upbeat about at this point demands a longer-term approach. You've got to realize there are increasing short-term signs that this story is looking more and more extended. After all, FXI entered Wednesday up more than 48% in 2009.

As noted above, ongoing government assistance on the mainland has led to explosive growth in the country's banking activity. But this could very well come back to bite China down the road in the form of bad loans. And the increasing GDP projections and soaring real estate speculation we're seeing could be viewed as bubble-type behavior.

So even with overall optimism about the story, I wouldn't be surprised to see some consolidation in Shanghai-tracking benchmarks and funds—even as the economic figures leaked by the state suggest a continued acceleration in GDP and related growth.

So what should one make of the latest Shanghai dive?

First, take a look at the broad outperformance of the international markets (particularly the emerging markets) versus the U.S. and other developed markets. Most emerging exchanges are up nearly double developed nations returns this year as the weak greenback is boosting gains on non-U.S. assets. Such currency fluctuations, in general, are also helping to goose performance in emerging markets because of the commodity play.

These inherently higher volatility/higher beta markets are thus manifesting themselves in strong upside volatility as the global financial recovery unfolds. The Far East casinos have been a big beneficiary of this trend, including Shanghai.

Bruce Zaro is chief technical analyst at Delta Global Advisors. He welcomes comments and suggestions for future blogs at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .