Another Worry For HSI (2010-03-17 HSI analysis)

There was finally some breaking news! and the continuous boring movements of the markets are over! Both Fed's ensurance of not increasing Interest Rate and the seem-to-be-over financial problem in Greece impacts on the indexes and EUR.

According to the graph in my previous post, EUR was successful in breaking the downtread line due to the news and was likely to heading upwards. I believe only other breaking information would change its direction such as "accidentally" discover another financial problem in Spain / Portugal.

Dow Jones Industrial Index broke the resistance line yesterday, but we still have to wait for 2-3 days before confirming its trend. But I predict that DJI would have its trend going upwards.

Now, let's get back to Hang Seng Index.



We can see that HSI raised through the fibonacci line and was attempting to break the 125-day moving average. This is really a big resistance! With my prediction on DJI, HSI could be brought up by DJI and the next point should be at 21,640. However, there is still a worry for such prediction of HSI: interest rates of China.

After such a long time of recovery, China seemed to have signals of improving economy. Last time, China government raised the reserve rates of its banks. This time, it is almost time for China to make a second step (given current high asset price) to increase its interest rate. If it is so, the China enquity markets would probably fall in a short period (say around few months), and HSI would follow such and become bearish. This is what we have to worry about before entering long positions in Hong Kong market.

Rest's over (2010-03-13 EURUSD analysis)

WOW! It just looked like nothing happnened this week! The heating atmosphere for the enquity markets cooled down a lot and the indices were just going up and down not more than 0.5%! Did you take enough rest during the previous week?

While everything is going so flat, we could not ignore the fact that EUR has already reached the upper line after a long and boring horizontal move. Yesterday EUR was trying to break upwards, with the help of the red triangle as shown below. However, it was just so powerless that it could hardly make it. EUR would have to break two lines, fibonacci and downtrend line, in order to achieve a higher position. But I predict that bad news about Portugal and Spain would follow and EUR would more likely to plunge sharply. The red triangle would push it downwards rather than giving it power to surge.



EUR would be more likely to drop to a new low and becareful of your long positions for EUR.

Slow recovery in Japan (2010-03-10 JPYNZD analysis)

Though the global markets seemed to be stablized after the great surge in HSI on Monday, the bull wave would be arriving as analyzed posted in my last blog.

I am always focusing on forex these days to gain more knowledge on cross rates rather than simply the rates to USD. It is really challenging for me as I do not have much time to keep track of the changes of the rates, and I have to use much of my spare time to do so. However, I am still a newbie in this aspect and I believe I am improving.

Today after reading news from Bloomberg about Japanese Yen, I did an technical analysis on JPY/NZD. On Bloomberg, a bond and currency dealer in Japan said due to the faster economy recovery in Asia-Pacific region than in Japan, many people showed their anticipation in NZD by selling JPY/NZD. That's why JPY/NZD dropped.



We could see that the price dropped through the channel and was heading to the next fibonacci line, which is at 1.5528. We would expect a small rebound at that point, but given the slow recovery in Japan, the line is probably having a very small supporting effect, and the price would go further downwards.

Be prepared for another "bull wave" (2010-03-06 DJI Gold analysis)

Just a brief summary, GBP returned to above 1.51 after its great drop to 1.478 last week. With the satisfaction to the policies made by Greek Government about increasing tax to reduce deficit, EUR stopped its sharp drop and became more stable. Now the currencies seem to be calm down for a while before any breaking news, and focus should be turned back to equities and commodities like Gold.

There was a good news to highlight, the surging Dow Jones yesterday led the price to break the unbreakable-for-three-trial line. Though it was only a small pass, together with the stablized unemployment rate and the better atmospher in the global markets, it is more likely for a bullish markets to begin. If it's really so, and DJI is confirmed to have successfully gone beyond the barrier, it is anticipated that Dow Jones would go as far as 10,900. This may bring Hang Seng Index further upwards.



We could often hear that when the market is falling, gold would always be a good shelter and with increasing demand, its price would rocket. So what would happen when DJI is expected to rocket instead? Looking at the below graph, we can see that there are at least 3 resistances. The upper downtrend line (in red), the 61.8%-fibonacci line (in thin dotted blue) and the barrier in thick blue dotted line. Given such many barriers, it is more likely that Gold price would hardly reach the highest point in three months and would remain more-or-less in the flat horizontal channel. Only really breaking news could lead to a volatile rise or drop for Gold.

Strange GBP (2010-03-02 GBP analysis)

Australia Central Bank raised the interest rate from 3.75 to 4 yesterday, but AUD reversed after two-day rise. This shows that actually the sensitivity of AUD to interest rate reduced and AUD is more likely to drop even after such a good news on AUD.

While everyone talking about EUR and the attack by speculators on it, we could not miss out one currency that has dropped quite a lot in the past few months --- Sterling. Seeing the below, we could find out that actually GBP has dropped over 8% in just half year and it was really horrible. It seems that there might be investors speculating on GBP too.



Doing some research on such an unusual-moving currency, I found out some data about the forecast of price on GBP by some companies. Let's see:



I circled the three groups that had the most pessmistic view towards GBP: Banque Cantonale Vaudoise Group, Morgan Stanley and UBS. Interestingly, two out of three base in Switzerland. UBS has changed her views after Sterling dropping to 1.48 and said it would go further downwards. Morgan Stanley said concerns on UK's shaky policies will further drag GBP to lower position.

On the other hand, Goldman Sachs and National Australia Bank predicted a surge in February shown in the poll and said GBP would go as high as 1.85.

The main reason for this strange movement is due to the growing concerns and debt in U.K. However, do they really contribute so much to such "expectations"? is it simply due to the speculations with huge amount of money? If so, looking at UBS and Morgan Stanley's active words, it seems like the drop is not yet over.

On contrary, Goldman and NAB do not have much words on Sterling, does it show that this time, they are not involved in the speculations?

Nevertheless, the next sign for movement of GBP should be the figures released about U.K. If there is no strong evidence on U.K. having measures to reduce debt, it will be a good time for another large drop in Sterling.

Back to Technical (2010-02-24 AUD/GBP analysis)

After Bernanke mentioned that the interest rate would not be increased in near future, market in US did not fall just like what HK did last Friday. So on Monday, HSI recovered what it dropped in previous trading day. However, according to my analysis in last blog, DJI is very unlikely to break through the red line which is a big resistant, and HSI would be following the drop of DJI. Today, HSI tumbled and let's see whether DJI would further topple later.

Other the other hand, as EU has asked Greece to submit a concrete budget-deficit-reduction plan within a month, probably there won't be any breaking news that send EURO fluctuating in near days. So let's change focus to another currency: AUD and GBP.

Getting back to Technical Analysis. We can see that AUD has just touched the upper line and is heading back downwards along the channel. The fibonacci line might give a little support but referring to the past two times, it looks like the horizontal line had quite little power.



More than the channel, another instrument gives us a very strong signal to short AUD. It is the slow stochastic. We can see that both K-line and D-line are roughly about 80. The most important thing is: the K-line has dropped through D-line in the area of above-80. This tells us that AUD is going down!



Other than AUD, let's see GBP. Though the signal is not as strong as AUD, looking at the down-trend channel, I predict that GBP will surge. So, for agressive investors, why not short AUD/GBP?

RUN! (2010-02-19 HSI+DJI analysis)

The Fed suddenly raised its discount rate by a quarter point yesterday after my blog stating that HSI would reach 21300 two days ago. But does it imply that my analysis is not accurate enough? My belief in technical analysis was actually inspired by a Bloomberg Manager. Actually a friend of mine had an interview by a Bloomberg Manager last year and the manager told him that "technical analysis could not predict when some incidents such as financial crisis breakout would happen, but it could then tell us that how far would the markets drop/rise". I strongly agree with this view on technical analysis.

Though we could not predict when the Fed would raise discount rate, through technical analysis, we can find out how much the markets would drop due to it. Of course, despite of the good signal for the economy, we would expect investors to move money away from the equities and commodities markets, therefore the stock markets would plunge. Let's see how low would it go.

Firstly, let's consider HSI.



As we could see, just like what I posted two days ago, there was a downtrend channel. The difference with the previous one is that the index went down back into the channel. This is a sign that it would go even further to the lower line, which is at around 19,100. You must be thinking that I am far too pessimistic. 4%-drop for an Index does not appear such often. But after you have done analysis on DJI, you may find that 4% is actually quite little when compared.



After the DJI tumbled through the red up-trend line, the line became a strong resistant for DJI. You can see that the index could hardly break through it. This time, again, DJI has climbed to the line. Together with the increase in discount rate, it would be obvious that not even a touch would happen before falling. The first support is at the middle line of the channel, which is at around 9,740. It is a 6%-fall! Anyway, it's time to sell most of your stocks to lock profits and... RUN!