Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Dec 16 ‘11

The Asian stock indices were in the middle of rallies two weeks ago, and had moved above their respective resistance levels. But the rallies didn’t look convincing, and investors were warned that bears may use the rallies to sell. That is exactly what they did.

Hang Seng Index Chart

The Hang Seng index chart closed 6 straight sessions above its 50 day EMA, but failed to move much higher. Eventually, it dropped and closed below both the 50 day and 20 day EMAs. The only saving grace for the bulls is that the Nov ‘11 low of 17613 has held so far. But may not be for long. Once the index drops below its Nov ‘11 low, a bearish pattern of lower tops and lower bottoms will get formed. The Oct ‘11 low of 16170 will then be under threat of being tested and broken.

The technical indicators are looking bearish. The MACD has crossed below its signal line in negative territory. The ROC is also negative, and below its 10 day MA. The RSI is just above its 50% level, but has started sliding down. The slow stochastic has fallen sharply below its 50% level and is about to enter its oversold zone.

The Hang Seng index is in a bear market. All rallies are providing selling opportunities to bears. There are no signs of a bottom formation as yet.

Singapore Straits Times Index Chart

The Singapore Straits Times index is looking rather weak. It managed to close above its falling 50 day EMA on four occasions before falling well below its 50 day and 20 day EMAs. The index dropped below its Nov ‘11 intra-day low of 2644 – thereby forming a bearish pattern of lower tops and lower bottoms.

The technical indicators are all bearish. The MACD is negative and falling below its signal line. The ROC is negative and below its 10 day MA. The RSI failed to move above its 50% level and has started to fall. The slow stochastic has dropped into its oversold zone.

The Oct ‘11 low of 2522 may be tested and broken soon.

Malaysia KLCI Index Chart

The Malaysis KLCI index has been in a bull rally since it touched an intra-day low of 1311 in Sep ‘11. Note the higher tops and higher bottoms touched during the rally. But the volume peaks are moving lower – indicating that the rally is losing strength. All four technical indicators are showing negative divergences – touching lower tops in Dec ‘11 as the index touched a higher top. The index has dropped below its slowly sliding 200 day EMA, and is technically in a bear market.

The technical indicators are weakening but haven’t turned bearish yet. The MACD has slipped below its signal line but is still positive. The ROC has dropped below its 10 day MA into negative territory. The RSI is rising above its 50% level. The slow stochastic has fallen just below its 50% level.

The bulls appear to be fighting hard, but the bears are slowly regaining control.

Bottomline? Counter-trend rallies in the Asian index charts appear to have ended. The Hang Seng and the Straits Times indices are in bear markets. The Malaysia KLCI index is desperately struggling to extricate itself from a bear grip. There is unlikely to be a quick end to the bear markets. Stay in cash.