Hong Kong: Hang Seng Index (.HSI) protests spark capital outflow fears

Hong Kong: Hang Seng Index (.HSI) protests spark capital outflow fears

Hong Kong: Hang Seng Index (.HSI) protests spark capital outflow fears

Apprehension over capital outflows triggered by escalating political unrest has driven Hong Kong’s stock market to its lowest this year and pressured its currency, with analysts warning of more weakness.

The Hang Seng Index .HSI fell 2.1% to 25,281.30 points on Tuesday, down 16% from the year’s peak, and is at lows last seen in early January.

It has fallen over 8% since June 12, when street clashes escalated between anti-government demonstrators and the police.

Hong Kong leader Carrie Lam pleaded on Tuesday for a stop to the protests, having warned of an economic “tsunami” engulfing the city last week.

The protests have angered Beijing, which called them “sprouts of terrorism”.

“Dropping the ‘T’ word is particularly disturbing as it does suggest a more aggressive mainland response, which triggered a wave of risk aversion across global markets,” said Stephen Innes, managing partner at VM Markets in Singapore, referring to Beijing’s response.

In the forex options market, risk reversal spreads were at their highest since 2016 on Monday in favor of dollar calls, suggesting investors are paying a high premium to bet on the Hong Kong dollar’s drop.

A CSOP Asset Management ETF that allows investors to bet against the Hang Seng (7500.HK) jumped to its highest on Tuesday since launching in May.

Technical Indicators

Overall, the bias in prices is: Downwards.

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

By the way, prices are vulnerable to a correction towards 27,211.79.

The projected upper bound is: 26,104.66.

The projected lower bound is: 24,393.15.

The projected closing price is: 25,248.90.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 23 white candles and 27 black candles for a net of 4 black candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 8 falling windows in the last 50 candles–this makes the current falling window even more bearish. The two candles preceding the falling window were black, which makes this pattern even more bearish.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

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 31.8934. This is not an overbought or oversold reading. The last signal was a buy 3 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 18.42. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 46 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 oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 3 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 16 period(s) ago.

Rex Takasugi – TD Profile

HANG SENG INDEX closed down -543.420 at 25,281.301. Volume was 11% above average (neutral) and Bollinger Bands were 122% wider than normal.

Open     High      Low     Close     Volume___
25,536.61925,616.71125,270.91025,281.3011,979,089,792
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 26,355.27 27,773.09 27,600.17
Volatility: 20 20 21
Volume: 1,854,116,480 1,567,159,168 1,795,286,016

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 gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
HANG SENG INDEX is currently 8.4% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume out of .HSI (mildly bearish). Our trend forecasting oscillators are currently bearish on .HSI and have had this outlook for the last 11 periods. Our momentum oscillator is currently indicating that .HSI is currently in an oversold condition.

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