Hong Kong Hang Seng Index (HSI) – More Downside

The Hong Kong equity market has a strong bullish run last month in the first three weeks before a pull back last week. The HSI surged to as high as 15,977.13 points but fell 1,422 points or 8.9 percent to close at 14,555.11 points on Tuesday. On-month, the HSI is up 435 points or 3 per cent. The better-than-expected corporate results in the US have created confidence in the market for investors to continue buying shares. However, trading volume has started to decline slightly compared to the volume in March. Investors are being more cautious because the market has already climbed 24 percent from the low of 12,125.80 points in March.


Daily HSI chart as at 28 April 2009 using NextVIEW Advisor. Click on chart for larger view.

The longer term moving averages (60- and 90-day moving averages) have increased slightly last month indicating a bullish trend and the strength of the trend is still considered strong because the momentum indicators are still in convergence with the HSI. The averages are currently between 13,500 and 13,800 points. At current level, the HSI is still overbought until it comes back to the averages. Therefore, expect more downward movements in the markets this month unless the HSI breaks above the 15,900 points resistance level.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

US DOW (DJI) – Fails to break resistance

The US equity market has been bullish last month but at a slower pace. In March the DJI increased 17.3 percent on-month but the increase in April is 3.8 percent. The DJI closed at 8025 points on Monday, falling 51.29 points amid declines in the Asian and European markets. The sentiment boost because of improvements in short term economic data in March has started to ease. The DJI failed to break above the intermediate down trend resistance line. The increase in the equity market does not reflect the improvements in the economy as analyst said that the economic recovery is still not within sight. Investors are being more cautious now.


Daily DJI chart as at 27 April 2009 using NextVIEW Advisor. Click on chart for larger view.

The DJI is currently hovering just above the short to long term 30 to 90 day moving averages. The long term trend is still bearish because the longer term 60- and 90-day average is still declining. The short term uptrend momentum has started to become weak. Since early April the RSI indicator is in divergence with the DJI. Resistance has become obviously strong. Therefore, expect the down trend to continue to the support level at 7,000 points if the DJI fails to go above the current resistance at 8,170 points.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Markets catch the flu

No, this time it is not the bird flu or the flu markets get when US sneezes. The pigs who are normally slaughtered in the markets controlled by bulls and bears are having their revenge. The swine flu's death count in Mexico grew to about 150 people from 100. The stocks of airlines, hotels and other tour related companies suffered losses in the US. Starwood Hotels and Resorts Worldwide Inc fell 11 percent, cruise operator Carnival Corp. fell 13.5 percent and Delta Air Lines Inc. dived 14.3 percent. However, pharmaceutical companies see marginal increase. GlaxoSmithKline gained 7.6 percent.

The Dow fell 51.29 points , or 0.6 percent, to 8,025.00. Before the US market opened, stocks in the rest of the markets were also lower.

FTSE Straits Times Index (FTSTI) – Further downwards correction

The FTSI was bullish in the first three weeks of last month and started to correct last week. The FTSI went as high as 1,947.30 points last week, near the 2,000 points resistance level from the double bottom chart pattern formation, before settling at 1,818.61 points today, after falling 34.24 points today. The FTSTI was up 107 points or 6 percent on month. The bullish factor was the better-than-expected financial and economic in the US, Singapore’s largest trading partner. There is still a concern over the sustainability of the economic improvement.


Daily FTSTI chart as at 27 April 2009 using NextVIEW Advisor. Click on chart for larger view.

The longer term moving averages (60 and 90 days moving average) have started to increase slightly last month indicating a bullish trend. There is a divergence between the momentum indicators and the FTSTI and this means that the uptrend is getting weaker. The averages are currently between 1,700 and 1,750 points. Therefore at 1,818.61 points, the FTSTI is still considered overbought expected to correct further downwards towards this range level. If price breaks above the resistance level at 1,950 points, then we may expect the FTSTI to continue the up trend.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

Kuala Lumpur Composite Index: Time for a pullback

Trading volume has increase tremendously with volume exceeding RM1 billion shares daily last week. Last week’s daily average volume was RM1.49 billion shares, 80 percent higher than the previous corresponding week’s average. On Thursday, the trading volume was almost RM2 billion. It may look good when the price trend is supported by strong increasing volume, but a jump or extreme increase in volume with smaller upward movements in the market may signal an end of a rally.

Technically, the down trend correction has extended after it broke the 940 points level extension should last until 970 points. The short to long term 30 to 90 day moving averages have started to increase but price is currently at the 200-day moving average which is currently at 963.30 points. The 200-day moving average is normally used as an indicator to indicate the long term trend by long term hedge funds. Therefore the KLCI is currently at a long term resistance level and we should see a down movement next week.

The Relative Strength Index (RSI) and Momentum indicators continue to make new highs indicating a strong up trend and the bulls are in total control. The weekly MACD histogram and daily ADX indicator continues to climb indicating that the long term momentum is also still bullish. The KLCI is staying at the top band of the Bollinger Bands. The KLCI has been overbought for three weeks in the short term. The Stochastic indicator is still hovering at the overbought level of 80. These indicators are indicating very strong bullish strength. However, the weekly Stochastic reading is now oversold and the last time it was oversold was when the market peaked at 1,500 points.


Daily KLCI chart as at 16 April 2009 using NextVIEW Advisor Professional

The KLCI managed to stay in the uptrend by staying above the moving averages. The KLCI is 8 percent above the averages which is considered overbought. I have been cautiously bullish for the past few weeks but with price currently at resistance levels, I believe it is time for the KLCI to pullback downwards. When the market gets greedy (as can be seen in the high increase in volume), it is time to be fearful. This is a quote from legendary investor, Warren Buffet.

I have mentioned previously that if the KLCI breaks above the 940 points level, I have to make a change in the long term forecast. I am still not convinced that the long term down trend is over. The current upward rally is an extension of the downward correction which has a target of 970 points. I will only be convinced if the KLCI can go above this level and stay above it. In the meantime, the long term target is revised from 550 points to 600 points. The KLCI is currently near 970 points level and let’s watch if the KLCI still has the momentum to go higher and stay above it but in the short term, I am expecting the KLCI to move downwards to 900 points, where the averages are.

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Article contributed by Private Trader, Market Expert, Trading Coach and Chief Market Strategist of Nextview, Mr. Benny Lee. For more articles and commentaries from Benny, click HERE.

FOREX: USD/CNY Analysis - 23 April

The minor price fluctuations on this week’s chart imply that a test of the R1 resistance level should happen soon.

The market continues to move in a relatively narrow range. The pattern as viewed on last week’s chart had some downside implications. It seems the downside move to test S1 fulfilled that expectation.

At this moment S1 is key to what the market will do in the near term. My expectation is that the market will continue to range between S1 and R1. A penetration of S1 will force a reconsideration of this view.


Daily USD/CNY chart as at 23 April 2009 using NextVIEW Advisor. Click on chart for larger view.

TECHNICALS
Stochastic – down.
RSI – currently in negative territory, and flat.
EMA 200 – flat
EMA20 – beginning to flatten.

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Article and Commentary by Don Schellenberg. A trader and trading coach, he is a noted expert on Market Structure, Elliott Wave and Fibonacci. He trades the forex market.