Comment: Like so many other major indices, Hong Kong’s Hang Seng recouped just over half of the losses from 2007’s record high, after basing ahead of many others in November 2008. Since October 2009 it has been forming a small but neat ‘head-and-shoulders’ top ahead of 61% Fibonacci retracement resistance. Last week it managed a close below the ‘neckline’ of this formation and well below the 50-day moving average. This week it is testing the 200-day moving average ahead of other major indices; these ought to catch up in February. It is not in the least bit oversold and momentum is a long way off turning bearish, so we favour a series of small but steady declines over the coming month. These should probably gather considerable downside momentum in Q2 2010 taking us down to 18,000 where consolidation is likely, and we have pencilled in another downside lunge later this year.
A monthly close above 22,000 forces us to review our outlook.
