Last week S&P downgraded Italy's outlook to negative, and investors were concerned about Greece's financial status (again), leading the Euros and stock markets to plunge. Fundamentally, Hong Kong market should somehow follow the down-trend due to the "concern".
One more important thing is that Milan Station will be listed today, this might result in a crazy capital inflow (the frozen capital for IPO), and crazy speculation on the market (Milan Station rose more than 50% in grey market trading). Nevertheless, these would cause high volatility.
Daily chart of Hang Seng Index (.HSI):
After almost forming a doji (with very short body) last week, the index bounced and closed at 23200. Interestingly, this level is a resistance because of the red down-trend line.
Furthermore, 20-day SMA also closed near this level, signaling a further resistance to HSI.
We can see the MACD and its EMA just touched each other, possibly forming a bullish cross which suggests a bullish market. But the shrinking volume might prohibit its formation.
Weekly chart of HSI:
On weekly chart, the index looks even worse. The slump in the beginning of last week brought the index below the 50-day Simply Moving Average. Then the index struggled to retrieve its position above the SMA, but obviously failed and closed just below the Average.
On the other hand, the index is still within the triangle formed by green and red solid lines. I predicted an increased volatility due to breaking of this area last week, but it didn't happen. Let's see whether it would happen this week.
Red dotted line is an unimportant line now as its levels are rising way too far. Green dotted line could possibly be the next bottoming indicator if the index breaks downwards.
The future market movement still appears to be quite unclear. While the index is in middle of the area on weekly chart, it might be a good choice to stay away and wait for the next signal, which would be the breaking of the area.
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