Hong Kong: HANG SENG INDEX (.HSI) credit figures for January added to signs of increased stimulus

Hong Kong: HANG SENG INDEX (.HSI) credit figures for January added to signs of increased stimulus

Hong Kong: HANG SENG INDEX (.HSI) credit figures for January added to signs of increased stimulus

A rally in Chinese equities steepened Monday as bumper credit figures for January added to signs of increased stimulus.

The Shanghai Composite Index jumped 2.7 percent by the close, taking its rebound since a Jan. 3 low to 12 percent, as turnover on mainland exchanges reached a 10-month high. The small cap ChiNext index in Shenzhen, typically the most speculative part of the market, soared more than 4 percent. The surge weighed on government bonds, with the 10-year yield climbing the most in two months.

The nation’s equities, which were the world’s worst performing in 2018, are starting to take off as the new securities regulator eases curbs on trading and an economic slowdown spurs monetary easing. In a sign of how broad the rally has been, the relative strength of four major indexes have all climbed above 70 — a level that signals to some traders an asset may be overheating. The last time that happened was May 2015, when the equity market was in a bubble.

Optimism that trade talks with the U.S. will bear fruit is adding to the risk-on sentiment, with further discussions scheduled for this week in Washington.

“The only two things that investors are looking forward to seeing are easing trade tensions between China and the U.S. and a more proactive policy stance at home,” said Shen Zhengyang, a Shanghai-based analyst with Northeast Securities Co. “Now that there are positive signs on their biggest concerns, the market will definitely trend up.”

Annual policy meetings by Chinese authorities in March may provide further fuel for the rally, Jefferies Hong Kong Ltd.’s Sean Darby wrote, saying it’s too early to sell stocks.

Brokerages and energy producers were among the best performers Monday, with industry gauges up at least 3.6 percent. Macau casino stocks rebounded from a bruising Friday, when they fell on concerns the Chinese government’s focus on illegal lending would hurt gaming revenue. JPMorgan said that reaction in stocks was perhaps overdone. MGM China Holdings Ltd. led casino gains, rising as much as 6.7 percent, its biggest intraday jump since Dec. 3.

Turnover on mainland exchanges rose to 547 billion yuan ($81 billion), the highest since April 2018. The Shanghai Composite closed at 2,754 points, above the median estimate of 2,750 that 22 analysts and fund managers saw the index at by end-March. The gains in the Shanghai and Shenzhen measures were the biggest this year.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 27,305.00.

The projected upper bound is: 29,305.84.

The projected lower bound is: 27,461.79.

The projected closing price is: 28,383.81.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 31 white candles and 19 black candles for a net of 12 white candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 61.2416. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 65.65. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 1 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 102.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed up 446.170 at 28,347.010. Volume was 9% below average (neutral) and Bollinger Bands were 8% narrower than normal.

Open High Low Close Volume___
28,186.75028,412.08028,186.75028,347.0101,597,879,936

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 28,130.24 26,729.03 27,727.69
Volatility: 18 22 23
Volume: 1,629,203,712 1,689,248,640 1,827,627,776

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

HANG SENG INDEX is currently 2.2% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into .HSI (mildly bullish). Our trend forecasting oscillators are currently bullish on .HSI and have had this outlook for the last 22 periods.

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