Back to Technical (2010-02-24 AUD/GBP analysis)

After Bernanke mentioned that the interest rate would not be increased in near future, market in US did not fall just like what HK did last Friday. So on Monday, HSI recovered what it dropped in previous trading day. However, according to my analysis in last blog, DJI is very unlikely to break through the red line which is a big resistant, and HSI would be following the drop of DJI. Today, HSI tumbled and let's see whether DJI would further topple later.

Other the other hand, as EU has asked Greece to submit a concrete budget-deficit-reduction plan within a month, probably there won't be any breaking news that send EURO fluctuating in near days. So let's change focus to another currency: AUD and GBP.

Getting back to Technical Analysis. We can see that AUD has just touched the upper line and is heading back downwards along the channel. The fibonacci line might give a little support but referring to the past two times, it looks like the horizontal line had quite little power.



More than the channel, another instrument gives us a very strong signal to short AUD. It is the slow stochastic. We can see that both K-line and D-line are roughly about 80. The most important thing is: the K-line has dropped through D-line in the area of above-80. This tells us that AUD is going down!



Other than AUD, let's see GBP. Though the signal is not as strong as AUD, looking at the down-trend channel, I predict that GBP will surge. So, for agressive investors, why not short AUD/GBP?

RUN! (2010-02-19 HSI+DJI analysis)

The Fed suddenly raised its discount rate by a quarter point yesterday after my blog stating that HSI would reach 21300 two days ago. But does it imply that my analysis is not accurate enough? My belief in technical analysis was actually inspired by a Bloomberg Manager. Actually a friend of mine had an interview by a Bloomberg Manager last year and the manager told him that "technical analysis could not predict when some incidents such as financial crisis breakout would happen, but it could then tell us that how far would the markets drop/rise". I strongly agree with this view on technical analysis.

Though we could not predict when the Fed would raise discount rate, through technical analysis, we can find out how much the markets would drop due to it. Of course, despite of the good signal for the economy, we would expect investors to move money away from the equities and commodities markets, therefore the stock markets would plunge. Let's see how low would it go.

Firstly, let's consider HSI.



As we could see, just like what I posted two days ago, there was a downtrend channel. The difference with the previous one is that the index went down back into the channel. This is a sign that it would go even further to the lower line, which is at around 19,100. You must be thinking that I am far too pessimistic. 4%-drop for an Index does not appear such often. But after you have done analysis on DJI, you may find that 4% is actually quite little when compared.



After the DJI tumbled through the red up-trend line, the line became a strong resistant for DJI. You can see that the index could hardly break through it. This time, again, DJI has climbed to the line. Together with the increase in discount rate, it would be obvious that not even a touch would happen before falling. The first support is at the middle line of the channel, which is at around 9,740. It is a 6%-fall! Anyway, it's time to sell most of your stocks to lock profits and... RUN!

Be Careful of 21,300 (2010-02-17 HSI analysis)

Following the financial problem in Greece, Goldman Sachs was "suspected" that they did not disclose any information about selling currency swaps to Greece in 2002. Though it was difficult to prove, Goldman could be facing legal liability for this as they might cause unfairness to the public about the finance situation in Greece. So would Greece be the only place for such "incidents"? or eventually would other countries such as Spain or Portugal be found to have undisclosed swaps too? Let's see in the future.

After some good news in the globe, such as more-than-doubles gains by Barclays and more-than-estimated growth in New York Manufacturing, the stock markets in the world rallied. HSI rised 1.77% before the lunch-break. So I did an analysis on short-term HSI. What I would like to know is how far the market would go up to as I strongly believe that the whole market is actually in the trend of downwards.



HSI broke through the middle trendline already for the second day, and as it is likely to remain in this area in the next few days, I predict HSI would go further higher to the upper trendline. It would be at around 21,318.38 before turning downwards. So, this would be a chance for a small gain but when it reaches around 21300, everyone should be careful about the reverse.

Continued Drop in EUR. (2010-02-13 EURUSD analysis)

Just before the long vacation of Lunar New Year in China, the world looked so peaceful and the most breaking news was probably the world largest car manufacturer Toyota was in the third round of recalling it's cars Tacoma. The effects of the second increase in reserve rate by China People Bank and the boost of retail figures in US would probably vanish (at least in China and Hong Kong) after the holiday.

And now my focus is mainly on the EUR attack by speculators in the world. As I did not experience the 1997 Asian Financial Crisis caused by the attack to Thai baht and followed by the attack to HKD in 1998, I am sure it would be a very great time for me to learn about large-scale currency war this time.

So let's get started.
Firstly, it started by Greece wanting to cut its budget-deficit. Then EUR raised due to expectation of increase in interest rate.
Secondly, there was a financial problem in Greece, and economy went down.
Thirdly, people found out that international speculators were in short positions of EUR, as the short-contracts greatly rocketed.
Then, some experts along with the public expected that EU would save Greece, EUR raised to around 1.3820 again (which was actually in three days ago).
Yesterday, it was found out that there was no concrete measures of how EU would save Greece, EUR reversed again.

Speculators could stand in a must-win situation:
1. they could gain from the drop of EUR if EU does not save Greece
2. if EU saves Greece, then interest rate would go upwards, giving pressure to the stock markets, and speculators could gain from the short-positions in stock markets too

However, in 1998-1999, Hong Kong Government spent billions to raise interest rate and at the same time buy lots of stocks in the stock market. Speculators could not gain and this was a victory showing how a government could beat the speculators up.

Would this time be the same as what happened in Asia in 1998? I guess no.

Hong Kong was "somehow" backed up by the China Government mainly due to its international position, and the China Government had large pool of money! Now, let's get back to the Europe case, would the EU love to spend such giant amount of cash to fight against speculators after which they might face serious economy problem in their own countries? Would they choose to simply save Greece so that the stock markets would be in bearish and speculators would declare a win again? or would they choose not to save Greece, but to support the stock markets and economy in their own countries?

So going into the technical analysis, there is no doubt that EUR is in a bad downward-trend. The fibonacci and the lower line might give some support to it for some little rebounds. Nevertheless, the whole trend would be dropping. So, it looks like that this time, speculators would knock out governments by the short positions of EUR.



--- written by Jeffrey Sha

Save Greece? or Budget-Deficit-Reduction? (2010-02-09 EURUSD analysis)

EUR has finally stopped dropping after the news that Greece would seek help from European banks. Though Greek insisted on her deficit-reduction plan, to maintain the value of EUR, European Central Bank could hardly ignore the great depreciation and let it be. Such act would probably bring EUR to a certain level.



As we can see from the above, EUR was dropping inside the downtrend channel. However, as the channel is quite deep, the "certain level" I mentioned above would be at around 1.3914, which is expected to reach in around two weeks.

Drop in Index, Rally in Commodity (2010-02-08 Gold analysis)

After my last blog, Zijin Mining dropped to 6.20 on the next trading day (which was actually on the lower line of the down-trend channel), and I bought its call warrant. Today Zijin Mining dropped due to the overall drop of Hong Kong market. It looks like that the gold price is still not enough to bring the price of Zijin Mining upwards. Today I did an analysis on Gold price.



The price dropped through the second line yesterday but it returned today. Though the whole trend is downwards, just like Zijin Mining, there would be a rebound after touching the second down-trend line. It just looks like Zijin Mining, doesn't it? The expected price for the rebound would be 1,090.

Bearish but a good stock (2010-02-04 HSI, 2899.HK analysis)

On 29-01, the graph suggested that the market would have a little rebound before a great drop. The rebound had finished these few days, and the tumble has begun. Today's analysis further supports such prediction. At around 19,800, there would be a small support, but it would probably be penetrated. Then the next big support would be at 18,800.



So for those who want to be in long position, please do choose a good stock which would be more likely to move in reverse way. I would suggest one of those: Zijin Mining (2899.HK). Let's see the below.



Both the fibonacci retracement and the lower down-trend line support the price for Zijin Mining. This is a very strong place to be broken through. The price is more likely to go up to at least to 7.5. Though the market might be in bearish, price of Zijin Mining could be brought up by the rocketing of Gold Price.

Not raising interest rate? (2010-02-02 AUDUSD analysis)

After today's little rebound, the whole globe market should start the way down again (as predicted by my post on 29/01). Today I have done an analysis on AUD due to the news that Australian Central Bank stopped raising the interest rate in Australia, which opposed what experts expected. AUD has dropped quite a lot after it, but after my analysis, I predict that it would go as low as 0.86.



AUD has been following the fibonacci retracement created using the high and low points before. We could see that reaching the 261.8% line, AUD dropped. Now, it looks like that it would keep going downwards. The down-trend channel tells us that 0.86 would be the first support. There is still quite a lot for us to gain if we short AUD/USD now.