Uncertain (2010-11-29 HSI analysis)

From around 23,500 at the beginning of last week, Hang Seng Index has dropped around 600 points and closed at 22,877. Both the conflicts between N.Korea and S.Korea and the debt crisis in Ireland (actually PIIGS before any concrete figures showing improvement in their financial status) helped set the market downwards.

Would HSI keep on dropping in the following week? It depends on whether it could stay above the support which is around 100-200 points from the current level.

Daily chart of HSI:


After the index broke its supportive uptrend line at around 23,600 last week, it plunged and reached the next support level.

Currently it is at around the support the zone, with support given by both the longer-term uptrend line and the fibonacci 50% level.

MACD dropped below 0, which would greatly reduce its momentum to keep on slumping.

Weekly chart of HSI:


For this longer timeframe, a bearish cross by MACD and its EMA just appeared, signalling a bearish market would follow.

On this chart, the green support line would be at the level of around 22,400. Again, the fibs 100% level by using projection on the wedge and the uptrend line provides the power to support the index.

It's hard to predict what would happen next week. Probably it would keep on falling to the support zone, and would have a bit consolidation. If the support breaks and the index drops below 22,400, we can have a even more bearish view. If not, it is quite risky to make any decisions for both long/short.