Friday, December 2, 2011

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Dec 2 ‘11

Two weeks back, the chart patterns of the Asian stock indices were in bear grips after a spirited rally during Oct ‘11 that raised prospects of trend reversals. Hopes of a resolution of the Eurozone debt crisis had triggered the rally. Realisation dawned that the funding required for bailing out some of the beleaguered nations may not be readily forthcoming.

Another rally started this week. The US decided to offer dollar loans under less stringent conditions to the Eurozone nations. That raised hopes of cobbling together the necessary bail-out fund. Short covering helped the cause of the mauled bulls. Will the rallies continue or fizzle out?

Hang Seng Index Chart


The Hang Seng index chart had dropped to a low of 17613 a week ago. The technical indicators indicated oversold conditions, so a brief pullback was on the cards. The news of monetary easing in China and the likely availability of US dollars triggered a gap up jump above its 20 day and 50 day EMAs on good volume support.

Note that the index is trading below its recent (Oct ‘11 and Nov ‘11) tops, and well below its falling 200 day EMA. It is technically in a bear market. Even if the current rally takes the Hang Seng above the 200 day EMA, bears are unlikely to give up their control.

The technical indicators are turning bullish, and hinting at a continuation of the rally next week. The MACD has just crossed above the signal line in negative territory. The ROC has risen sharply above its 10 day MA into positive territory. But such sharp moves do not sustain for long. The RSI climbed out of its oversold zone, but failed to cross its 50% level and turned down. The slow stochastic has climbed vertically out of its oversold zone, and managed to cross its 50% level.

Don’t try to chase the rally. Talk of resolution doesn’t mean actual resolution of a deep-seated debt problem in Europe.

Singapore Straits Times Index Chart

Straits Times_Dec0211

The Singapore Straits Times index has been following the footsteps of the Hang Seng index of late – including the gap-up jump above its 20 day and 50 day EMAs. It is also trading below its recent tops and well below its 200 day EMA. Note today’s volume bar. The index closed 11 points higher than yesterday (Dec 1 ‘11) on half the volume. A bearish sign.

The technical indicators are turning bullish. The MACD is negative but has just crossed above its signal line. The ROC has risen too sharply above its 10 day MA into the positive zone. The RSI has turned down before reaching its 50% level. The slow stochastic has just about managed to climb above the 50% level.

The rally may provide the bears with another selling opportunity.

Malaysia KLCI Index Chart

KLCI Malaysia_Dec0211

The Malaysia KLCI index seems to be extricating itself from the bear’s grip. It rose above its 200 day EMA and its recent tops to its highest level in more than 3 months. Note that the rally has been accompanied by rising volumes, and the index has formed a bullish pattern of higher tops and higher bottoms.

Does that indicate a change of trend? Not yet. The 20 day EMA and the 50 day EMA need to cross above the 200 day EMA; the 30 point gap (between 1509 and 1539) has to be filled; and the KLCI has to breach the Jul ‘11 top of 1584. The bears won’t give up the fight that easily. Today’s trading bar indicates bull’s are hesitating – the index opened and closed at almost the same level on a high volume day.

The technical indicators are bullish. The MACD has crossed above its signal line in positive territory. The ROC has risen above its 10 day MA into positive zone. The RSI has moved above its 50% level. The slow stochastic has reached the edge of its overbought zone.

Bottomline? The Asian index chart patterns have started counter-trend rallies once again. The Hang Seng and the Straits Times indices are still in bear markets. The KLCI is trying to re-enter a bull market. Next week’s trading should be interesting. Bears may become active again. Conserve your cash till a clearer picture emerges.

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