Still bearish (2011-09-05 HSI analysis)

Last week the general stock markets' movements were quite hard to predict. Firstly, the market rose in the beginning of the week; and then, when people started thinking about buying, the indexes just plunged. HSI opened at 19,883 on Monday, boosted to as high as just below 21,000 on Thursday, and closed at 20,212 on Friday.

This week of course it would be an event or news-driven week. As shown in my previous thread, there would be 5 major rate decisions, several unemployment rates, CPI and GDP data coming out. Therefore, the stock market movements this week could be extremely volatile, especially when we expect that each news could bring huge influence on the markets.

While its hard to predict by forecasting all those economic data, technical analysis can help a lot. We can keep an eye on those critical levels.

Daily chart of Hang Seng Index (.HSI):

Apparently last week HSI once broke the middle line of Andrew's Pitchfork. On Thursday, the index touched the red down-trend line which appeared to be a strong resistant, and plunged.

On Friday, the index got back below the middle line. It seems like HSI still doesn't have enough power to break out.

Apart from the red down-trend line, the 50-day Simple Moving Average was another strong resistant too. This was shown with HSI opened at that level but was then pushed lower, and closed below the SMA.

The index will probably fill the gap on last Tuesday first, and may retreat lower. It still needs some more time to gain momentum for breaking above the resistances.

Weekly chart of Hang Seng Index (.HSI):

Weekly chart gives a clearer picture again. The resistant-force given by the red resistant line is the same as the daily chart (of course..).

However, we can see another interesting resistant: Pitchfork. The index tried to surge above the middle line of pitchfork, but obviously it failed and pare its gain and got back below the line.

I expect this week HSI would go down, given that the index had already tried so hard to break out last time. Bullish power gets weaker and bearish power would dominate this week.

So pitchfork is of course one of the most important levels to watch out. The lower line is currently at 18,400. There would be strong support at this point.

Before that, the short-term up-trend line which supported the two previous lows will give support at around 19,300. If this level breaks, HSI will drop to 18,400.

For the upside, the red up-trend line still gives vital resistant at the level of around 20,900. If the index breaks out, the previous gap in late July 2011 will probably be filled, and the next resistant level is at top line of Pitchfork: around 22,000.

Again, given such poor economic conditions worldwide, I carry pessimistic views on the coming economic data. My view is still bearish on the stock markets.