While the economy might appear to be better this month, with good figures from Consumer Confidence and Sales, the underlying sovereign debt crisis has yet to be solved before a concrete decision and consensus are made within EU. Even if they do, the economy could take years to recover the whole world could be under recession for a pretty long time.
Nevertheless, stock markets are not too bad, but not too good either. At least in Hong Kong there are quite a lot of IPOs coming and investors could pick one to two with good potential to develop, given that they have done their homework. IPOs are not my main focus but I have to admit that it is quite interesting after trying several times to analyze the companies.
Anyway, let's take a look at this week's Hang Seng Index (HSI).
Daily chart of HSI:
The chart looks quite plain, but I guess given such messy days with high volatility, not making the chart looks more complicated that it should is a wiser way to predict.
The index is currently facing a resistant provided by the red down-trend line, and it looks quite strong, HSI could hardly break this.
However, if it does, the next resistant level will be at around 20,300 as suggested by the retracement level.
On the other hand, the green line keeps on supporting the index. So if it does not break out, we could expect it to move in the narrowing range between 18,000 - 19,000.
Weekly chart of HSI:
As usual, the Pitchfork currently dominates the chart. The index moves quite beautifully within this fork.
It reached the median line last week, and faced strong resistance. It looks like that the index could hardly break out.
However, if breakout really happens, the next resistant level suggested on weekly chart is 19,500, as compared with 20,300 as suggested on daily chart.
Downside support is at around 17,900, not far from 18,000 on daily chart. So we could expect strong support at 18,000.
BUT one important thing is that this week there are several Economic data releasing, and most of them show good signs to the stock markets.
For example, interest rate cut from Australia and Europe, rise in GDP in Australia, and drop in CPI and PPI in China. These could lead the stock markets upwards, and possibly break the red line as well. So this week we are looking at 19,500 and 20,300.
If it does happen, this is a good example of looking at both economic data and technical.
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