Hong Kong: HANG SENG INDEX (.HSI) The Future of the Trade Deal
Sometimes, investors get too excited about a future event. They price in too much extra value before a big announcement. This is a common problem during earnings season. It’s one of the reasons stocks are much more likely to move more than 10% to the downside after companies release earnings than they are to move more than 10% to the upside.
The ambiguity around accurately pricing in a future event means we have to consider the risks of something being overpriced — or even worse, the possibility of an event or announcement not happening at all.
This is the issue that tripped up the market this week. Investors (including us) had been expecting more good news about the U.S.-China trade war and the release of a short-term deal. Therefore, we can assume that much of the value of that deal was already priced into the market.
However, on Monday and Tuesday, President Donald Trump threw cold water on investors’ expectations. He suggested he would be willing to wait until after the 2020 election for a deal with China. Plus, he announced the potential for reinstated tariffs on U.S. trading partners Argentina and Brazil.
This morning there were a few more “official rumors” that indicated that talks are still on track, but the damage has already been done.
The Bottom Line on the Trade Deal
This week’s volatility is frustrating because it is hard to quantify. It’s being imposed on the market by an external factor — politics. This will put traders more on edge if we see more bad fundamental news.
For example, the Bureau of Labor Statistics will release the employment numbers for November on Friday. If the number of new jobs is lower than expected or wage growth is too slow, investors may use that as a trigger to sell.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 27,280.44.
The projected lower bound is: 25,738.42.
The projected closing price is: 26,509.43.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 5 rising windows in the last 50 candles–this makes the current rising window even more bullish.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 35.5101. This is not an overbought or oversold reading. The last signal was a buy 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 47.31. 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 20 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 -42. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 5 period(s) ago.
Rex Takasugi – TD Profile
HANG SENG INDEX closed up 281.330 at 26,498.369. Volume was 0% below average (neutral) and Bollinger Bands were 44% narrower than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 26,571.52 26,637.68 27,645.48
Volatility: 19 18 19
Volume: 1,556,994,304 1,500,239,488 1,752,789,760
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.
HANG SENG INDEX gapped up today (bullish) 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 4.1% 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 volume flowing into and out of .HSI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .HSI and have had this outlook for the last 11 periods.
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