- The Hong Kong Hang Seng Index initially fell during trading on Monday, as reports started to circulate that several Chinese cities have seen protests over the lockdowns coming back.
- In fact, some of those protests have become rather violent, so when the market opens up on Monday morning, it does make a certain amount of sense that we saw a lot of “risk off behavior.”
- Hang Seng traders are a proxy for mainland China, as the Hang Seng is much larger than Shanghai.
Hang Seng Index Highly Related to China
That being said, we turned around for a bit of a hammer sitting right at the 50-Day EMA, and it looks as if we are trying to turn things back around. If we could take out the top of the hammer for the day, then the next stop will probably be HK$18,000. If we can break above there, then the HK$18,500 level would be next. Anything above there could be a potential trend change.
Part of what is driving Chinese stocks a bit higher could be the fact that the local currency is dropping in value. This is not the local currency of the Hong Kong dollar obviously, but the Chinese Yuan. The Chinese yuan on losing strength will greatly influence a lot of mainland companies that are listed on the Hang Seng, so there is a bit of distortion coming from the Forex markets.
That being said, the market was to turn around and break down below the bottom of the hammer for the Monday session, then HK$16,000 would be the target, followed by the HK$15,000 level. While this has been a nice rally as of late, one can make an argument that we have just simply had a corrective bounce and that the sellers will be coming back rather soon. A lot of concerns will circulate around the covid lockdowns and of course the global slowdown that is going to be drastically aggressive around the world. Keep in mind that a lot of Chinese companies will be highly sensitive to the global economy as there are so many exports coming from that part of the world. Ultimately, we are on the precipice of making a bigger move, so it’ll be interesting to see how this breaks in the next move. From a longer-term standpoint, the Hang Seng has been in a horrible downtrends I do favor fading rallies in signs of exhaustion or breakdowns.
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