After the crazy rise... (2011-10-31 HSI analysis)

Last week there was good news regarding the European Debt problem, the facilities were expanded. Stock markets surged crazily, including Hang Seng Index. The index finally reached 20,000, since early September.

This week's focus would be on Thursday, depending on how Bernanke comments on the economy. Also there are several unemployment rates to be released this week.

Daily chart of HSI:















After boosting last week, the index reached 50% retracement at around 20,300, and obviously faced huge selling pressure and closed lower, just above 20,000.

It seems like this level has a certain power now, and the index would need some time to break out. Therefore, the index should undergo little correction and drop a bit.

Support is of course 38.2% at around 19,300.

However, if HSI breaks out, the next resistant will be at around 20,600 given by the purple Pitchfork on the graph.

A further resistant is at around 21,400. This is an extremely strong trend-line because the index has been moving below it for a pretty long time.

One thing worth mentioning is that the volume rose last week. This tells us that the surge was not likely to be a false one. Generally we can have better view on the index.

Weekly chart of HSI:















The orange Pitchfork is the usual one used before. We can see that the index just broke out the median line of the Pitchfork. This shows that we could not under-estimate the power of the rise.

Fibonacci retracement is the same as that on daily chart, giving the same support and resistant levels.

Another thing is that MACD and its EMA are touching each other. This is a possibility that a bullish trend will be suggested by the cross-over. But of course be aware of any false signal.

In general, for this week, I carry a more bearish view because of the very quick rise last week. Resistant levels are pretty strong now. So I think it would be trading within 19300 - 20300.

Good luck

Important Economic Data this week (2011-10-30)

31-Oct (Monday)
20:30 Canada GDP (YoY) {Forecast: Slight drop from 2.3% to 2.2%}

1-Nov (Tuesday)
09:00 China PMI Manufacturing {Forecast: Slight rice}
11:30 Reserve Bank of Australia Rate Decision {Forecast: Rise from 4.50% to 4.75}
17:30 UK GDP (YoY) {Forecast: Slight drop from 0.6% to 0.4%}

2-Nov (Wednesday)
16:55 Germany Unemployment Change {Forecast: Less negative}

3-Nov (Thursday)
00:30 US FOMC Rate Decision {Forecast: Unchanged at 0.25%}
02:15 Bernanke Speaks at Fed Press Conference
05:45 New Zealand Unemployment Rate {Forecast: Slight drop}
02:45 European Central Bank Rate Decision {Forecast: Unchanged at 1.50%}

4-Nov (Friday)
19:00 Canada Unemployment Rate {Forecast: Unchanged at 7.10%}
20:30 US Unemployment Rate {Forecast: Unchanged at 9.10%}

source: http://dailyfx.com

Any weakness? (2011-10-27 CCB analysis)

Above is the daily chart of China Construction Bank (0939.HK).

The price just broke out the green down-trend line which lasted for around 5 months. Such breakout signals a strong bullish trend.

Moreover, the orange Pitchfork indicates a more conservative movement prediction for the stock. The breakout of the green line also meant the breakout of the median line of the Pitchfork.

However, there is still one concern. The volume on breakout days didn't raise. This makes me feel bad and think this might be a weak breakout, which could not last long.

Nevertheless, if it drops, the Pitchfork and the down-trend line are considered supports now, which are at around 5.3 and 5.1.

Resistant is at around 5.6, the 38.2% fibonacci retracement level. The purple pitchfork is relatively steeper, we should take it as reference but not rely on it too much.

Any sign of weakness? (2011-10-26 VIX analysis)

It doesn't look like it would break below the lower red line, but the long inverted hammer pattern seemed to be a sign of weakness. Still pretty hard to guess its way.

How US Dollar goes (2011-10-25 DXY analysis)

Watch out of huge movement of US Dollar Index.

Coming is nice week (2011-10-24 HSI analysis)

Good news' coming out from Europe's crisis-management summit. European leaders agreed to outline a plan to help banks, and will discuss whether to expand European Financial Stability Facilities on Wednesday.

Last week basically was dominated by news around Europe debt problem. Hang Seng Index opened high on Monday, but then pared its losses and plunged in following four days.

VIX still has no sign of slumps in low levels. But it is still not at emergent times when volatility index keeps on climbing to new highs.

Let's get back to Hang Seng Index.

Daily chart of HSI:















The red down-trend line is basically how the index has been moving in these few weeks, starting from August 2011.

Last week the index attempted to break this red resistant line, but apparently it failed and fell back below this line, within the red channel.

Buy drawing a fibonacci retracement using the high and low within the red channel, we can see that 38.2% successfully resisted the index two weeks ago, and 23.6% supported the index well last week. These two are probably the important levels to look at in short period.

But in general, it is pretty clueless when looking at the daily chart alone.

Weekly chart of HSI:















The Pitchfork is just the normal one that I was using all time. We could see that last week the index was well supported by the lower line of the fork.

Besides, the 23.6% on this chart might somehow help support the index as well. This results in a pretty large supportive force at this area.

In fact, the index was resisted by the 10-day Simple Moving Average last week which therefore could not surge higher.

Combining the two charts, I somehow have a little bullish view in short-period this week. If the index rises, around 19,500 would be an extremely strong resistant. The index would need some power to break out.

For the down-side, around 18,000 will be a short term support. If the index breaks again, then there would be no immediate support.

Good luck.

Important Economic Data this week (2011-10-23)

24-Oct (Monday)
08:30 Australia Producer Price Index {Forecast: Slight drop}
15:30 Euro-Zone Purchasing Manager Index Composites {Forecast: Slight drop}

25-Oct (Tuesday)
05:45 New Zealand Consumer Prices Index {Forecast: Drop}
21:00 Bank of Canada Rate Decision {Forecast: Unchanged at 1.00%}
22:00 US Consumer Confidence {Forecast: Slight increase}

26-Oct (Wednesday)
08:30 Australia Consumer Prices Index {Forecast: Slight drop}
16:00 ECB Publishes its Bank Lending Survey
20:30 US Durable Goods Orders {Forecast: More negative}
22:00 Canada Monetary Policy Report

27-Oct (Thursday)
Bank of Japan Rate Decision
04:00 Reserve Bank of New Zealand Rate Decision {Forecast: Unchanged}
20:30 US GDP {Forecast: Increase from 1.3% to 2.5%}

28-Oct (Friday)
21:55 U. of Michigan Confidence {Forecast: Slight increase}

source: http://www.dailyfx.com

Regular analysis (2011-10-21 VIX analysis)

Another good "consideration" news successfully reversed losses of US markets and S&P 500 Index closed 0.46% above its previous close.

Hang Seng Index today is quite likely to gain. So it means that the week's HSI was trading above the 50% retracement level as well as the Pitchfork on weekly chart. Will be back to it on next Monday.

Today will be one of my regular analysis: volatility.
















Above is the daily chart of Volatility Index (.VIX). The index is still within the large red trading range after the false breakdown last Friday.

Indeed, if we draw another uptrend line, we can see that last Friday's candlestick was actually supported by this uptrend line, produced using the two troughs at the beginning of the bullish trend.

So it is confirmed to be a false breakdown. But how would the index move next?

Yesterday, a candlestick with very long upper shadow was formed. This indicates that the "buying force" is more or less weakening.

The purple downtrend line shows that VIX is forming lowering peaks (except highest one in late September to early October).

If you have been reading my blog, you probably know that I am quite bearish on volatility. The long-shadow candlestick further enhances my view.

But one concern is that there is a bullish cross, this is kind of scary to me. We have to see whether it would become a whipsaw or not.

Support is given by both the lower boundary of red channel and the green uptrend line, at around 29.20 - 30.

Resistant is at around 36.9, and next one is at around 44. If it happens then there must be something happened in Europe like having no conclusion on rescue plan.

Good luck.

Gambling (2011-10-20 Galaxy Entertainment Group analysis)

Stock markets fluctuate again, due to good news from Apple and bad news from France and Spain. Directions are hard to catch, and good luck to all traders. The news/event-risk is pretty horrible.

Today I will take about one of the companies in a pretty volatile industry these days. This industry is Macao Gaming.
















Above is the daily chart of Galaxy Entertainment Group (0027.HK). I guess most of you should have heard of it, its hotel facilities and casino in Macao are simply amazing.

Back to the chart, this stock has been moving upwards since the last quarter in 2008. Starting from 2010, it snowballed along the orange upwards trending line and reached as high as 22.45 in August 2011.

The stock price broke the orange up-trend line in mid-September when the concerns in Europe appeared to be extremely serious and non-solvable.

However, in early October, the price managed to climb back above this line. This tells us that the overall bullish trend still hasn't ended.

On the other hand, the dropping peaks since August 2011 form another downwards trending line shown in green.

This week, the price broke this green line, showing that its short-term bearish trend may have changed.

Two days ago the price plunged, but was well supported by both the green and orange lines and rebounded yesterday.

We can see a strong buying force when the support was reached. Besides, MACD is heading upwards but it is still below zero. The momentum for further spikes still exists.

Therefore, I have a bullish view on this stock. 50% retracement resisted the stock price, but I think it would soon break. 61.8% is at around 17.2, I think this is the first resistant for the stock.

For the downside, I think 14-14.5 is a strong support zone. Once the price breaks this area and reaches lower, it would probably slump to 12.

Chart speaks (2011-10-18 EUR analysis)

Above is the 4-H chart of EUR/USD.

Trade based on your risk-bearing level. There have pretty strong support to Euros at this moment.

The two charts look good (2011-10-17 HSI analysis)

Led by the excellent Retail Sales data in US, S&P 500 Index (SPX) spiked and closed at 1224.58. This means that the resistant on both daily and weekly chart breaks (~1200-1210). It seems like the volatility analysis dominates and stock markets should start to calm down a bit.

Hang Seng Index did well last week too. It opened at 17,853, reached as high as 18,758 and closed at 18,501.

After the meeting of finance ministers and central bankers from G20 economies in Paris in past weekend, it sounds pretty optimistic regarding helping Europe get out of trouble. Stock markets would probably surge due to this good news today.

Let's see how HSI would move this week.

Daily chart of HSI:















Apparently, the short-term Pitchfork is not a strong resistant after the index falling too low. It now becomes a support but I believe we can hardly use it again.

Hang Seng Index reached the red downward trend line on last Thursday. This line successfully resisted the index and so the index could not rise higher on Friday.

Apart from the red trend-line, around 18,700 is also 38.2% fibonacci level. Going back a bit, we can see that HSI's movement was restricted by this level for a several. We couldn't ignore the power of this level.

Therefore, on daily chart, it suggests a drop in HSI this week. Probably the index would reach around 17,750 which is 10-day Simple Moving Average as well as 23.6% retracement level.

However, if the index breaks 18,700, we could not see good resistant forces in short-term. It may be able to climb up to over 20,000.

Weekly chart of HSI:















I did put the orange Pitchfork last week on weekly chart and claimed that 18,000 would be a strong resistant to the index. So it appeared that I was wrong, and the index just broke this level without any difficulty.

For this week, if the index is moving lower, the support would be at around 17,800 which is provided by both the 61.8% retracement level and the Pitchfork.

Upside would be limited at around 19,500. If HSI reaches this level, it is more likely to slump and consolidate.

These are some levels that we should be aware of. Looking at the bigger picture, I would carry a good view on the index for this week. It could reach around 19,500.

Important Economic Data this week (2011-10-16)

18-Oct (Tuesday)
08:30 Australia Reserve Bank's Board October Minutes
10:00 China Real GDP (YoY) {Forecast: Slight drop from 9.5% to 9.2%}
16:30 UK Consumer Price Index (YoY) {Forcast: Increase from 4.5% to 4.9%}
17:00 German ZEW Survey (Economic Sentiment) {Forecast: Slightly more negative}
20:30 US Producer Price Index (YoY) {Forecast: Slight drop}

19-Oct (Wednesday)
00:30 US Fed's Bernanke Speaks in Boston
16:30 Bank of England Minutes
20:30 US Consumer Price Index (YoY) {Forecast: Unchanged}

20-Oct (Thursday)
14:00 German Product Prices (YoY) {Forecast: Unchanged}
16:30 UK Retail Sales {Forecast: Rise}
22:00 US Existing Home Sales {Forecast: Drop}

21-Oct (Friday)
17:00 Euro-Zone Government Debt-GDP Ratio
19:00 Canada Consumer Price Index (YoY) {Forecast: Slight drop}

Further analysis on volatility (2011-10-14 VIX analysis)

Hang Seng Index spiked another 2.34% to 18,757. It looked like those resistance levels meant nothing to the index. So basically after surging back within the Pitchfork, the next resistant should be at around 19,500.

But S&P500 Index was moving as expected. Two days ago it closed at around 1,207 and yesterday it dropped a little bit to 1,203. We can see the resistant zone actually worked.

Let's take a look at the volatility.
















Above is the daily chart of Volatility Index (.VIX). As usual, we can see the big red channel with a wide trading range from around 30-46.5 now.

The index touched the lower boundary of the channel two days ago, and rebounded yesterday. It appeared that the channel is still a strong one which restricts the movements of the index.

However, I found an interesting fact. By drawing a fibonacci retracement using the low in April and high in August, we can see that 50% retracement is a pretty strong support level.

Firstly, it supported the index from plummeting even lower in mid-August, at the level of around 31.

Since then, the index more or less closed above this level, even after they had an intra-day low below this level. The lowest close was 30.98 on 16-Sept.

But yesterday, the index closed at 30.7. This means that the strength of the support is getting weaker. It might be time for the index to move on to the next retracement level.

Would it be the case I mentioned last week, that the index is going to plunge and drop to pretty low levels and move sideways?

If so, then S&P500 index would probably not slump, and is more likely to rise slowly or moving sideways.

Two stories (2011-10-11 SPX analysis)

Looks like the two charts with various time-frames of S&P500 Index are telling different stories.

Daily chart of SPX:















Weekly chart of SPX:
















So basically, on daily chart, we can see an obvious MACD divergence and bullish cross. These are pretty nice indicators telling us that the index is going to surge.

The index almost reaches the upper line of its channel. The range is quite large, so it is relatively difficult for SPX to break out. Strong resistant area is at around 1200-1210.

On weekly chart, instead of signaling any spiking possibilities, the chart actually signals further slumps.

Orange dotted line was the previous upward trend line, SPX was rising gradually along this line. Then, in August 2011, the index broke the trend with an extremely long black candlestick. This told us that the bullish trend has ended.

So given S&P500 index is moving under bearish trend now, the red flag actually becomes a bearish continuation flag. Such pattern signals further drop.

Indeed, MACD shows no bullish cross or divergence on weekly chart. So on a medium-term view, the index is still not considered as being under bullish trend. Chance for falling is higher.

This lets us go back to Hang Seng Index. Though yesterday the index broke the Pitchfork easily and closed above 18,140, if US markets are not going to rocket, HSI is less likely to surge greatly too.

Let's spend one more day to observe how HSI would go!

Turned bearish (2011-10-11 DXY analysis)

Following Germany and France's assurance on bank recapitalization in an attempt to save the EU countries from going bankrupt, European market and US markets spiked. S&P500 closed at 3.41% above previous close.

Most likely Hang Seng Index would follow the surge as well. As mentioned yesterday, 18,000 is a pretty strong resistant to HSI. So be aware of this level.

So let's see how US Dollar is doing after the announcement from Europe.
















Above is the 4-hour chart of US Dollar Index (.DXY). As you all know, the heaviest component in this index is Euros. Then it would be Japanese Yen and Sterling.

We can see that the index rose gradually since early September. This means that US Dollar was strengthening at that time, most likely because of the concerns towards European debt problems which pulled down the Euros as well as the pounds.

But starting in early October, the index appeared to have topped and started to fall. But it was still within the red upward trending channel.

The news announced did successfully cause a huge movement in the index. DXY finally broke the channel few candlesticks ago, which was due to strengthening of Euros.

It is obvious that if the "concerns" about Europe debt problems are eased, then more people are confident on buying bonds and longer-term debts from the government, and that EUR would strengthen. This is therefore the reason why DXY falls below the support.

Using the low in late August and the high in this month, we can draw a fibonacci retracement. Interestingly, the previous plummet of DXY stopped at around the 38.2% retracement level. So I believe that the index would do a slight rebound.

The rebound would be stopped at around 78, when the index meets its 10-day Simple Moving Average. Then the index probably slumps again, and reaches the next retracement level which is the support: 76.7.

So the whole trend of DXY turns to be bearish now, which means that US Dollar would probably be weakening. However, one question pops out: given the negative correlation between Dollar and Hang Seng Index, if I suggest that DXY is going to fall, HSI should be ready to rocket. So today's analysis on DXY made me review my analysis on HSI again to check whether I have made something wrong. But somehow I still don't have much idea up till now.

Therefore, I think we should spend 1-2 more days to observe any special movements, such as break out of the previous Pitchfork on HSI daily chart and so on.

Good luck.

Time to calm down (2011-10-10 HSI analysis)

Last week was a choppy week. Hang Seng Index first plunged to as low as 16,170 on Tuesday. Then everything had changed after the public holiday on Wednesday. Good news from Europe led the global stock markets to undergo a huge rebound and HSI jumped and closed at 17,707.

Though it looked like too volatile to trade, the rebound after reaching ~16200 was not too hard to catch. It is the level supported by a medium-term upward trending line. Macao Gaming stocks rallied greatly, with over 30% jump in stock price in just two days (Thursday and Friday). Given their performance, I guess this week's focus might be on them as well.

One more extremely important issue. The last Policy Address by HKSAR Chief Executive Mr. Donald Tsang would be revealed on Wednesday. It is expected that he would talk more about property prices and policies, with a possibility that more flats are built for Home Ownership Scheme which could impact the property industry. So for those who are holding any these kinds of company would have to be prepared for any event risk on Wednesday.

Now let's get back to our regular HSI analysis.

Daily chart of HSI (finally):















I haven't been posting daily chart for two weeks because I could not get any clue from the previous charts. But this week it seems to be a bit clearer.

The orange Andrew's Pitchfork was the normal one. The index broke it in mid-September. The lower line became the resistant to HSI (which was shown in late September).

I have identified another Pitchfork, which is a short-term one, shown in purple. Hang Seng Index was following the upper channel and slid since September 2011.

After the rebound last week, the index is currently testing the upper line of the Pitchfork. The level represents a strong resistant line which HSI did not go beyond since September.

Other than the current pitchfork, there are two another big resistance forces at around 18,000, which is around 300 points from now.

The first one is of course the previous Pitchfork shown in orange. This is just the same case as that occurred in late September.

The second one is the fibonacci retracement. By using the high in late August and the low last week, we found that 18,000 is the 38.2% retracement level. This also resists the index.

So daily chart is telling us that HSI would need an extremely strong buying power in order to break out these resistant; otherwise, this week would be a bearish week.

Weekly chart of HSI:















The orange pitchfork is just the same as that one on daily chart, while the fibaonnci retracement is a different one.

The green upward trending line was able to support the index well last week, stopping HSI to slump below 16,000.

Using the low in Oct-2008 and the high in Oct-2011, I drew another retracement. We can see that ~16,200 is the 61.8% retracement. So actually there were two forces supporting the index last week. We have no surprise why the rebound was so strong then.

So the situation is getting a bit interesting now, or actually I should say not interesting from traders' views.

For the upside, the previous pitchfork with down-trend is resisting the index. For the downside, the medium-term up-trend green line is support the index. HSI is now in the middle, and both sides are pretty hard to break.

Still remember my post on VIX last Friday? I suggested that its time for VIX to take some rest and calm down. This also means that the volatility would drop. Stock markets either move gradually upwards or consolidate (it is always hard for the markets to move downwards slowly).

Considering also the VIX, I believe that HSI would start moving sideways, with the current range of 16200-17800. This range is definitely narrowing given the converging support and resistant. This also means the purple pitchfork on daily chart will collapse (which is not a surprise as its slope is too steep for a long-lasting trends).

So the coming two weeks would be a cool-down period after fluctuations in past few weeks. This is a good period for us to do more research and find out how most stocks are performing and whether the markets would end its bearish movement or not. And we can grab some time to find out any undervalued stocks.

Important Economic Data this week (2011-10-09)

11-Oct (Tuesday)
China New Yuan Loans
13:00 Bank of Japan Monthly Eocnomic Report
16:30 UK Industrial Production {Forecast: More negative}

12-Oct (Wednesday)
02:00 US Fed Releases Minutes of 20-Sept FOMC Meeting
16:30 UK Jobless Claims Change {Forecast: Increase from 20.3K to 24.0K}

13-Oct (Thursday)
07:50 Bank of Japan Publish Minutes of 6-7Sept Board Meeting
08:30 Australia Unemployment Rate {Forecast: Unchanged}
14:00 Germany Consumer Price Index {Forecast: Unchanged}
16:00 European Central Bank Publishes Oct. Monthly Report

14-Oct (Friday)
10:00 China consumer Price Index {Forecast: Slight drop}
17:00 Euro-Zone Consumer Price Index - Core {Forecast: Increase}
20:30 US Advance Retail Sales {Forecast: Increase to 0.5% from 0%}
21:55 US U. of Michigan Confidence {Forecast: Slight increase}

source: http://dailyfx.com

Findings on Volatility (2011-10-07 VIX analysis)

R.I.P. to Steve Jobs. Though I'm not Apple fans, he did help a lot in innovation.

So basically yesterday European Central Bank announced that they would introduce year-long loan again to let banks get enough cash. Some strategists even said that the biggest rally in S&P500 since 1998 in the last quarter in 2011.

Interesting enough, isn't it? Though I don't think the markets would surge crazily, I think the plunge will temporarily end here when HSI touched the medium-term support at around 16,100. Rebound is following and the index will probably test the resistant at 18,000 again. This is the first stage, if it passes, then then next resistant will be at around 19,700.

Today I am going to talk about volatility.

Daily chart of Volatility Index (.VIX):















The index has been moving in a range recently, as shown in the red on the above chart. This channel ranges from around 32-48.

But the channel is a downward trend channel, so both the support level and resistant level drop as time passes by.

In last few days, S&P moved around 1% every day, compared with more than 2-3% days ago, so the index dropped.

As suggested by the channel, the next support level is at around 30. Therefore, it is quite likely that VIX would drop to around 30 from the current level. This means that S&P500 won't suffer from great slumps at least in these few days.

Apart from this, I found an interesting pattern on weekly chart.

Weekly chart of Volatility Index (.VIX):















Basically, as mentioned before, the index could hardly surge above the level of around 50. The only time was due to sub-prime mortgage crisis in 2007-2008. VIX was up to almost 90.

However, VIX did try a few times to break this critical level. We can see that there were six trials in total including the two recent ones.

Interestingly, each time after two trials, the index would be quite likely to drop.

The first box represents the two trials in 1997 and 1998, after that the index remained at the trading range of 15-30 for almost 3 years.

The second box represents the two trials in 2001 and 2002, and after that the index slumped to the range of 9-15 for almost 5 years.

So this time we observe a double top again. Would it follow the historical fact? or would it spike and break 50?

Not having a breakout at 50 means that S&P500 would calm down and is not likely to plunge. It might even snowball to higher levels. So it also means that EU and US both get rid of the poor situations now and global stock markets would gradually rise.

A rebound followed by another bearish wave (2011-10-05 IT analysis)

Following the EU report on financial industries, the US finally ended its crazy plunges and S&P 500 Index closed at 1124, a jump of 2.25%.

Today's Hong Kong's public holiday, tomorrow it should jump, especially for banks, unless the US markets plummet today. It seems like the green line on weekly chart is still able to support the index. A rebound should follow.

Let's see an interesting stock.
















Above is the daily chart of I.T. (999.HK). And the Group is mainly engaged in retailing and trading of fashion wears and accessories. (from http://aastocks.com)

Back to the chart. The stock price is obviously moving in a bearish trend currently, with a pretty steep slope.

The red line near the bottom represents its medium up-trend line. Apparently, I.T. made a nice breakdown at the end of Sept 2011. I could hardly see a strong support trend-line other than this until 2.50.

Andrew's Pitchfork does work on this chart. Using the high-low-high in July and August, I drew the purple pitchfork. We can see the upper line of pitchfork resisted the price well.

The stock price gradually fell. After reaching the middle line on 26-Sept-2011 at around 4.20, the price bounced and immediately plummeted again.

If the whole market is going to rebound, the resistant for this rebound for the stock would be at 4.70, which is around 17% from now. This resistant is given by the Pitchfork.

Going back a bit, there was an wedge formed in May 2011 - July 2011, shown in orange. The stock attempted to break the upper level a few times but failed. Then the price just broke the lower line and headed to lower levels.

By using wedge breakout estimates, the next support level would be at around 2.10, following the previous level at 4.20 which did support the price once successfully.

Therefore, after the price has rebounded to around 4.60-4.70, I would expect another plunge to as low as 2.50, and then 2.10 if it drops further. It would be a good time to SHORT at 4.60-4.

Going to rebound? (2011-10-04 GBP/USD analysis)

Gosh, another 2.36% plunge for Dow Jones, intra-day loss was really horrible yesterday night 'cause the index was not doing too bad at open.















Above is the daily chart of GBP/USD. Should be too surprised seeing that recent bearish trend due to the concerns in Europe and the strength-gaining USD.

I think for medium-term traders, the green line represents an extremely important support level for sterling. Once this line breaks, GBP would be heading to perhaps the previous low in May 2010 which is around 1.423.

But please be aware of any false breakout as well such as that the two candlesticks on 22-sept-2011 and 23-sept-2011. Confirmation is always a critical step when determining any trend changes.

Apart from the trend line, I have also added a Pitchfork and a retracement.

The retracement is straight-forward. The pound reaches its 50% retracement level and the supportive force seems to be quite strong here. Next level would be 61.8% which is at around 1.520. These are important support levels.

Pitchfork looks beautiful on this chart too. The false breakout was coincidentally at the interception of the green line and the lower line of Pitchfork. That's the reason why the buying force was such strong that kept pushing the price back above the two lines, forming a false breakout.

Therefore, actually we can see that the supportive forces are quite strong currently. I don't think sterling would plunge easily and break all these levels. There should be some rebound following.

Extremely strong resistances are found at around 1.578, given by both the retracement and Pitchfork.

More on long-term (2011-10-03 HSI analysis)

Had a really busy week with lessons everyday and test on Friday about Fundamental Tools. School officially starts and I guess I would be even busier. But that's life for a MSc student.

Back to the market. Greece finally approved 6.6Billion Euros of austerity measures till 2012. But this might not necessarily be a good news to stimulate the markets 'cause it still depends on whether Greece would be aided.

Hang Seng Index (HSI) did drop slightly below 17,000 last week but was able to stay above this level, and closed slightly lower than the Open last week. In general, it only had a short body for last week's candlestick.

Weekly chart of HSI:















This week I have zoomed out a bit on the weekly chart, and would post a monthly chart analysis as well. Short-term movements are really hard to predict in such event-driven market.

Andrew's pitchfork as usual, as the index plunged below the fork, the lowest line changed its role as support to resistant, and successfully stopped HSI from surging higher at around 18,000.

This is not a good sign as it tells us that 18,000 becomes a strong resistant zone. It takes time for the index to recharge and break out.

Green line represents a medium-term support. We can see there will be support to the index at around 16,200.

Indeed, the two fibonacci retracements give support at around 16,150 and 15,670. We can expect a strong support at this zone.

HSI closing at 17592 last week means that there is still room for the index to slump. I expect it to drop to around 16,100.

Monthly chart of HSI:















Monthly chart is another good example of Technical Analysis at educational purpose. The chart shows the monthly candlestick of Hang Seng Index since 1993.

The retracement is the same one as that on weekly chart, suggesting a support at around 15,700.

The reason why I said this chart is good at educational purpose is because of the pitchfork. We can see that since 2003, HSI started to move upwards along the fork, and broke down in 2008 after Financial Crisis.

After that, the fork became resistant and resisted the index two times in 2009 - 2010. Together with the retracement, we can now understand the tops of the index.

So what's next? It seems like there is no supportive power until 23.6% retracement at around 15,700. And then there should be technical rebound.

The green line represents a very long term support. HSI has been above this line since 1994 and it shows a 17-year upward trend. This is the ultimate support, and I don't think break down would happen unless there are wars in Hong Kong.

Hope today's long-term analysis would give you a more general picture of HSI. I suggest if you are not watching the markets every minute, you should not do short-term trading these days. Such news-driven markets could easily reverse intraday trend and might make you loss quite a lot.

Important Economic Data this week (2011-10-01)

All times are +8GMT (i.e. Hong Kong Time).

3-Oct (Monday)
16:00 Euro-Zone Purchasing Manager Index {Forecast: Unchanged}
22:00 US ISM Manufacturing {Forecast: Slight drop}

4-Oct (Tuesday)
11:30 Reserve Bank of Australia Rate Decision {Forecast: Unchanged at 4.75%}
17:00 Euro-Zone Producer Price Index {Forecast: Slight drop}
22:00 US Fed Chairman Bernanke to Testify before JEC

5-Oct (Wednesday)
16:30 UK GDP {Forecast: Unchanged}
17:00 Euro-Zone Retail Sales {Forecast: Drop from -0.2% to -0.7%}

6-Oct (Thursday)
19:00 UK BOE Asset Purchase Target {Forecast: Unchanged}
19:00 UK BOE England Rate Decision {Forecast: Unchanged at 0.50%}
19:45 European Central Bank Rate Decision {Forecast: Unchanged at 1.50%}

7-Oct (Friday)
Bank of Japan Rate Decision
19:00 Canada Unemployment Rate {Forecast: Unchanged at 7.3%}
20:30 US Change in Non-farm Payroll
20:30 US Unemployment Rate {Forecast: Unchanged at 9.10%}

source: http://www.dailyfx.com