- The Hong Kong stock exchange has been rather resilient over the last several weeks, as we continue to threaten quite a bit of major resistance.
- The 200-Day EMA sits right around where we are trading and is just below the psychologically important HK$20,000 level.
- This is an area that obviously would attract a lot of attention, so it should not be a huge surprise to see that we are stalling in this general vicinity.
Over the next couple of sessions, we will probably have to answer the question as to whether we have enough momentum to continue going higher, or if this is the end of the correction phase. Ultimately, I think we are at a point of inflection, and the next 5% of gains or losses will show themselves soon enough. Keep in mind that the Federal Reserve has a statement late in the day on Wednesday, and although on the other side of the world, the Hong Kong dollar is pegged to the US dollar, that will have a certain amount of influence on monetary policy by the Hong Kong Monetary Authority.
The Next Couple of Days Will be Crucial
The HK$19,000 level underneath I thinks it still offers a nice support level, followed by the 50-Day EMA which is just above the HK$18,000 level. On the other hand, if Hang Seng finds itself above the HK$20,050 level, then that could kick off the next big rally. In that scenario, I anticipate that this market will first stop at the HK$21 level, and then the HK$22,000 level.
As monetary policy is pegged in Hong Kong against the US dollar, it is probably not much of a stretch to say that this chart looks suspiciously like the S&P 500. The 2 do tend to move in tandem over the longer term, but that can also be said with most indices. It’s all about “risk on/risk off”, but in this case we have the added influence of the Chinese mainland and what they are doing about covert restrictions. They do seem to be opening, so that has been part of the reason we have seen so much bullish behavior. Whether or not it is sustainable is a completely different question, because the easy money has probably already been made to the upside. With this, the next couple of days should be crucial.
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