Time to choose (2011-05-17 SSEC analysis)

Hang Seng Index was unable to remain above 23,000 yesterday and closed at 22960. We could see the China markets were plunging as well, but EU and US markets showed no sign of great slump. Therefore, we could comfortably assume a close relationship between HK markets and China markets in near future.

Next, I have analyzed Shanghai Composite Index (.SSEC).



Above is the daily chart of SSEC. The green line is a long-term up-trend line which is expected to provide support now, as the index is touching the line.

On the other hand, the red is a medium-term down-trend line which would resist the index from surging beyond it.

While the two lines are converging, it is time for SSEC to choose which side to break, just like the situation HSI is facing now.

Though yesterday HSI is trying to break down, the magnitude from the support and close wasn't that large. We could still treat it as "above the support".

And then it would all depend on how the China market moves. If SSEC bounces tomorrow, we should see HSI follow.

If SSEC breaks downwards, then we have to observe and see whether to confirm a break down for HSI or not. Normally, we can confirm if HSI is still below the support this Friday.