The Asian market places (except Japan) are most of the time much more volatile and choppy than the other big stock exchanges in the world. The bullish and bearish moves are often exaggerated as those markets are considered as emerging economies. The speculation is particularly impressive and generates quick double digits gains and losses through the indices.
A good example is the Hang Seng Index, the stock market index in Hong-Kong. When most of the major indices in the world have the same shape and typically the same timing for extreme highs and lows, the Hang Seng has a different chart.
Despite the historical high was posted in late October 2007 (point A on the chart, similarly to the other world major stock indices), the lowest point of the following decline was posted exactly one year later, in late October 2008 (while the other major stock indices posted their own lows in March 2009).
From this high at 31,556 points (point A) to the extreme low of 10,676 points (point B), the Hang Seng lost 66% of its value. It’s bigger than the S&P/ASX 200 for instance, which fell by “only” 54% between November 2007 and March 2009.
Same over-reaction on the upside: while the Dow Jones, the European indices and the ASX 200 recently reached the 38.2% Fibonacci retracement ratio of their respective plunges, the Hang Seng has already reached the 50% ratio. This means that between last October and early August this year (between points B and C), the Hang Seng doubled (100% up).
The previous Fibonacci ratios were already strong intermediate resistances, and it is likely that this 50% ratio will hold as a major technical resistance (around 21,300 points).
Yesterday the index closed at 19,724 points, 7% lower than the recent high (point C). A further correction is expected. The previous Fibonacci resistance levels may appear as the new intermediate supports now. In this scenario the new targets on the downside would be the levels of 18,700 points, then 15,800 points.
All the indicators have turned bearish and confirm the coming pull-back (the Chande Momentum Oscillator for example is clearly oriented downward).
