Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Sep 09 ‘11

It is interesting to note the upward bounces in the index chart patterns of the Hang Seng, Straits Times and KLCI. The Hang Seng faced the ‘death cross’ two months back and bounced the highest – all the way to test the gap in the chart and the falling 50 day EMA. The Straits Times experienced the ‘death cross’ a month ago and closed above its falling 20 day EMA twice. The ‘death cross’ on the KLCI chart is imminent, but it failed to cross above its 20 day EMA.

Hang Seng Index Chart

Once the Hang Seng entered a bear market – confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA back in Jul ‘11 – bears have successfully used the ‘sell on rises’ strategy. The up move in Jul ‘11 faced resistance from the 200 day EMA. The upward bounces in Aug ‘11 and Sep ‘11 have been resisted by the 20 day and 50 day EMAs. The unfilled gap area and the falling 200 day EMA will be much stronger hurdles for any future counter-trend rallies.

No such rally is expected, as all three EMAs are sliding down with the index trading below them. The intra-day low of 18868, touched exactly a month back, is likely to be tested and breached. The technical indicators are giving mixed signals. The MACD is rising above its signal line, both both are in negative territory. The ROC is barely positive, and just above its 10 day MA. The RSI dropped below its 50% level, only to bounce up. The slow stochastic is below the 50% level. There may be a bit of sideways consolidation before the Hang Seng heads down.

Singapore Straits Times Index Chart

The two gaps on the Straits Times chart were formed on heavy volumes, which makes them formidable resistances to any up moves. The index managed to climb above the 20 day EMA but failed to test the smaller of the two gaps. The index has formed a ‘reversal day’ pattern, marking the end of this week’s up move.

The technical indicators are mildly bullish, with the MACD rising above its signal line in negative territory, and both the RSI and the slow stochastic above their 50% levels. But the ROC is dropping sharply in the positive zone, and is about to cross below its 10 day MA. There may be some consolidation before the intra-day low of 2681, touched on Aug 22 ‘11, is tested.

Malaysia KLCI Index Chart

Unlike the Hang Seng and the Straits Times indices, which have been in prolonged down trends since reaching their peaks in Nov ‘10, the KLCI index touched its peak just two months back. The Hang Seng index has dropped more than 24% and the Straits Times index has lost 19% from their Nov ‘10 peaks. The KLCI index has corrected just about 11% from its Jul ‘11 top, and is technically still in a bull market.

But the technical indicators of the KLCI are looking the most bearish. The MACD is just above its signal line in the negative zone. The ROC is also negative, and dropping towards its 10 day MA. The RSI and the slow stochastic are below their 50% levels. There is a small gap on the KLCI chart, but it formed a month back above the 200 day EMA. The 50 day and 200 day EMAs are going to provide resistance to any up moves before the index can take a shot at filling the gap.

Bottomline? The chart patterns of the Hang Seng and Straits Times indices are in bear markets. The KLCI Malaysia index is likely to follow them soon into bear territory. The Asian economies are dependent on overseas business, and the indices are suffering from the poor recoveries in the US and Eurozone economies. Things may get worse before they get better. Stay on the sidelines.