Stock Index Chart Patterns – Jakarta Composite, Singapore Straits Times, Malaysia KLCI – Mar 09, ‘12

A month ago, the chart patterns of the Jakarta Composite, Singapore Straits Times and Malaysia KLCI indices were looking bullish, after recovering well from bear attacks. The bulls have been trying hard to regain control and momentum. But the bears are still reluctant to give up ground. In the process, some interesting chart patterns have been forming.

Jakarta Composite Index Chart

The Jakarta Composite index never entered a bear market technically. The 50 day EMA had bounced off the 200 day EMA back in Oct ‘11, and has been moving up since. After a sharp drop below the 200 day EMA and an equally sharp recovery, the index has been trading within an upward-sloping channel for the past four months.

The interesting thing to note is that the index faced strong resistance from the 4030 level, where it had earlier faced resistance in Jul, Aug and Sep ‘11. As a result, the index has not been able to make any headway for the last two months – though it is trading above its rising 200 day EMA and is technically in a bull market.

The technical indicators are mildly bullish. The MACD is barely positive and has merged with its signal line. The ROC has crossed above its 10 day MA into positive territory, but appears unable to decide which direction it wants to go. The RSI is resting at its mid-point. The slow stochastic has dropped from its overbought zone.

The bulls still have some work left to be able to test the Aug ‘11 top of 4196. 

Singapore Straits Times Index Chart

The Singapore Straits Times index climbed smoothly above all three EMAs. The ‘golden cross’ of the 50 day EMA above the 200 day EMA (marked by light blue oval) technically confirmed a return to a bull market. But the lower edge of the gap (at 3030 level) formed in Aug ‘11 is providing strong resistance to the bull rally.

After a short correction down to its rising 50 day EMA, the index has bounced up smartly. But the technical indicators are yet to turn bullish. The MACD is still positive, but has made a bearish ‘inverted saucer’ pattern and is falling below its signal line. The ROC has dropped into negative territory. The RSI is below its 50% level. The slow stochastic bounced up from the edge of its oversold zone, but is below its 50% level.

The bulls need to concentrate their efforts on closing the Aug ‘11 gap before they can hope to regain control.

Malaysia KLCI Index Chart

The Malaysia KLCI index chart is clearly trending up in a bull market, and looks the most bullish of the three indices. After coming within two points of its Jul ‘11 top of 1597, the KLCI index had to beat a slight retreat. Will the brief setback turn into a correction?

The technical indicators are suggesting the possibility. Volumes have reduced considerably and all four indicators touched lower tops (marked by blue arrows) as the index rose to test its previous top. The combined negative divergences may pull the index down some more.

Note that all three EMAs are rising in tandem and the KLCI is trading above them. That is a clear sign of a bull market. Do not make the mistake of shorting a rising index. Use any dips to add.

Bottomline? The Asian index chart patterns are back in bull markets. The bears haven’t given up the fight, but are slowly losing ground. Once the nearby resistance levels are overcome, the bulls will regain complete control. Add the dips and maintain trailing stop-losses.

Stock Index Chart Patterns – Jakarta Composite, Singapore Straits Times, Malaysia KLCI – Feb 10, ‘12

It has been almost two months since the Asian index chart patterns were last analysed, and it is quite interesting to see how they have fared during the global liquidity-led rally since then.

Jakarta Composite Index Chart

The Jakarta Composite index had been one of the best performers in 2011. Despite the sharp correction during Aug and Sep ‘11, the index did not technically enter a bear market – as can be seen from the behaviour of the 50 day EMA, which bounced off the 200 day EMA and started rising again. The ‘death cross’ that confirms a bear market never happened.

But the rally seems to have run into strong headwinds. The index has dropped to its 50 day EMA, and may fall some more. The technical indicators are looking bearish. The MACD is positive, but falling below its signal line. The ROC is below its 10 day MA and has dropped into negative territory. The RSI and the slow stochastic are sliding and are below their 50% levels.

Singapore Straits Times Index Chart

The Singapore Straits Times index technically fell into a bear market in Aug ‘11, as confirmed by the ‘death cross’ of the 50 day EMA below the 200 day EMA. The index has recovered smartly by rising above its 200 day EMA on strong volume support and formed a bullish pattern of higher tops and higher bottoms, but the 50 day EMA is still below the 200 day EMA. The big gap formed in Aug ‘11 hasn’t been filled yet, and may provide resistance to the rally.

The technical indicators are beginning to correct from overbought conditions. The MACD is positive and above its signal line, but starting to turn down. The ROC has dropped below its 10 day MA, which has made a bearish rounding top pattern. Both the RSI and the slow stochastic are in their overbought zones, but starting to slip down.

Malaysia KLCI Index Chart

The Malaysia KLCI index is technically back in a bull market. The ‘golden cross’ of the 50 day EMA above the 200 day EMA has confirmed that. After spending the month of Jan ‘12 in a rectangular sideways consolidation, the index broke out upwards on a rapid increase in volumes and filled the gap formed in Aug ‘11.

The MACD is positive and above its signal line. The ROC is above its 10 day MA in the positive zone, but turning down. Both the RSI and the slow stochastic are in their overbought zones. The rally may still have some steam left in it.

Bottomline? Strong liquidity-driven rallies have changed the technical complexion of the Asian index chart patterns. The bulls have gained the upper hand, but the bears are not yet out of the picture and may make a last ditch effort to turn around their fortunes. Use any dips to buy selectively.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Jan 6 ‘12

The chart patterns of the Asian indices, last analysed three weeks back, are showing clearly diverging moves. The Hang Seng index is moving sideways in a bear market; the Straits Times index is sliding down in a bear market; the KLCI Malaysia index is climbing up in a bull market.

Hang Seng Index Chart

Since touching an intermediate top at 20173 in Nov ‘11, the Hang Seng index has been consolidating sideways within a symmetrical triangle pattern. The index is trading well below its falling 200 day EMA, so the logical break out of the triangle should be downwards. But triangles can be unpredictable. The index may break out upwards or continue to trade sideways.

The technical indicators are bullish, but showing signs of weakness. The MACD is above its signal line and trying to enter the positive zone. The ROC is positive and above its 10 day MA, but turning down. The RSI is above its 50% level, but its upward movement has stalled. The slow stochastic has dropped down from its overbought zone.

A break below the triangle could lead to a test of the Oct ‘11 low.

Singapore Straits Times Index Chart

The Singapore Straits Times index is in a bear market, and has been trading within a downward-sloping channel for the past couple of months. Note the falling volumes, which is typical in down trends.

The technical indicators are giving contrasting signals. The MACD is rising above its isgnal line, but is still in negative territory. The ROC is positive and above its 10 day MA, but has turned around sharply. The RSI has climbed towards its overbought zone. The slow stochastic has already entered its overbought zone.

The index may make another attempt to cross above the downward channel. Whether it will be successful or not is a moot point.

Malaysia KLCI Index Chart

The KLCI Malaysia index appears to have shaken off the bears as it climbed above all three EMAs. The index is trading within an upward-sloping channel. The 20 day EMA has crossed above the 200 day EMA. The 50 day EMA is all set to follow suit – the ‘golden cross’ will confirm a return to a bull market.

The bears have not been vanquished yet. Note the progressively lower volume peaks as the index has moved up. There are negative divergences visible in the MACD and ROC, which failed to touch higher tops with the index. The technical indicators are correcting from overbought conditions.

A drop to the lower edge of the channel is a possibility, but the up trend may not get reversed.

Bottomline? The three Asian index chart patterns are moving in three different directions. The Hang Seng index is consolidating within a triangle; await the break out. The Singapore Straits Times index is in a down trend; sell the rallies. The KLCI Malaysia index is in an up trend; buy the dips.

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.

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

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

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.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Nov 18 ‘11

The sharp bear market rallies on the Asian index chart patterns are clearly over, and the bears are regaining their control with a vengeance. Three weeks back, the strong upward momentum on the indices, backed by good volumes, had hinted at possible trend reversals. Those hopes have been belied.

Hang Seng Index Chart

The big gap in the Hang Seng chart – marked by the blue dotted rectangle – remains unfilled. The 200 day EMA has fallen below the gap. The two together are likely to provide strong resistance to any up moves in the near future.

Note that the 20 day EMA became entangled with the 50 day EMA, but failed to cross above it. The Hang Seng index is again trading below all three EMAs after spending some time above the 50 day EMA, and is technically in a bear market.

All four technical indicators have turned bearish. The MACD is below its signal line, and about to drop into the negative zone. The ROC is below its 10 day MA, and both are falling in negative territory. The RSI is ready to enter its oversold zone. The slow stochastic has already done so. A test of the Oct ‘11 low of 16170 is a distinct possibility.

Singapore Straits Times Index Chart

There are two gaps on the Straits Times index chart – marked by dotted rectangles – which remain unfilled, and the 200 day EMA has slid below both gaps. Note how the two rallies in Aug ‘11 and Oct ‘11 stopped short of the lower (smaller) gap.

Like on the Hang Seng chart, the 20 day EMA failed to cross above the 50 day EMA despite the STI spending several days above the medium-term moving average. The index is trading below all three EMAs and is in a bear market.

The technical indicators are looking bearish. The MACD is still positive, but is falling below its signal line. The ROC is below its 10 day MA, and inside negative territory. The RSI has dropped to the edge of its oversold zone. The slow stochastic has entered the oversold zone. The Oct ‘11 low of 2522 may be tested.

Malaysia KLCI Index Chart

The gap on the KLSE index chart formed well above the 200 day EMA, and remains unfilled. The index made a valiant effort to cross above the long-term moving average, but failed to do so convincingly despite strong volume support. The index retraced almost 64% of its fall from the Jul ‘11 top of 1597 to the Sep ‘11 bottom of 1311, and the 20 day EMA crossed above the 50 day EMA.

But the last two days’ selling by the bears seems to have undone all the good work by the bulls. The technical indicators are turning bearish, which means a deeper correction is likely. The MACD is positive, but has crossed below its signal line. The ROC has entered the negative zone, and is below its falling 10 day MA. The RSI and the slow stochastic have fallen sharply below their 50% levels. The index is trading below all three EMAs and is technically in a bear market.

Bottomline? The Asian index chart patterns have returned to their bear markets, after sharp counter-trend rallies last month raised the prospect of trend reversals. All rallies and up moves are being used by bears as selling opportunities. Time to conserve cash. A long winter is ahead, but the bears are not in a hibernating mood.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Oct 28 ‘11

The apparent ‘resolution’ of the Eurozone debt crisis seems to have acted like a tonic for the Asian stock indices, which soared past expected resistance levels, backed by strong volumes. Two weeks back, I had made the following comment:

‘The first signal of a trend reversal will be the crossing of the 20 day EMA above the 50 day EMA. So keep a watch on the short-term and medium term moving averages.’

The 20 day EMAs are still below the 50 day EMAs, but things may change quickly if the general euphoria in global markets continue unabated next week.

Hang Seng Index Chart

The Hang Seng chart has filled the gap between 18300 and 18700 quite comfortably, and rose past its 20 day and 50 day EMAs. The larger gap between 21018 and 21726, and the falling 200 day EMA are likely to provide stronger resistances to the rally.

The technical indicators are looking overbought, which may lead to a correction or consolidation. The MACD has risen sharply above its signal line into positive territory. The ROC is also positive and above its 10 day MA, but reached a lower top as the index rose higher. The RSI and the slow stochastic are both inside their overbought zones.

A correction down to the 50 day EMA may help the index to gather more energy to climb past the 200 day EMA. Till then, it technically remains in a bear market.

Singapore Straits Times Index Chart

Like the Hang Seng index, the Straits Times index crossed above its 20 day and 50 day EMAs backed by strong volumes, and has come close to testing resistance from its falling 200 day EMA. Though technically still in a bear market, the strong upward momentum can reverse the down trend quickly.

The technical indicators are looking overbought, which could lead to a pause in the rally or even a correction. The two gaps on the chart formed on Aug 5 and Aug 8 ‘11, and the falling 200 day EMA are probable resistances to a further up move.

Malaysia KLCI Index Chart

Two weeks back, the overbought technical indicators pointed to a correction. The correction was swift, and dropped the KLCI almost 100 points (about 6.5%) from 1465 to 1371 in the space of 5 trading sessions. The recovery was sharp, and in today’s trade the index crossed above the 200 day EMA intra-day, before closing exactly on the long-term moving average.

The MACD is positive and rising above its signal line. Both the RSI and the slow stochastic are in their overbought zones, but both failed to reach new highs with the index. The ROC is positive but has crossed below its 10 day MA. A correction down to the 50 day EMA won’t be a surprise.

Bottomline? The three Asian indices are in the midst of sharp recovery rallies that are hinting at possible trend reversals. The overbought technical indicators are pointing to a pause or  brief corrections next week. The feel-good factor of the Eurozone debt resolution may wane a bit over the weekend after the fine-print is closely analysed. The worst is probably over for the Asian indices, but it may take a while for bullish sentiment to return.

Comparative performance of Sensex and global indices

One keeps reading and hearing that the Sensex has been one of the worst performers among global stock indices over the past one year. So I decided to take a look at some of the leading global indices (in blue) to check whether the Sensex (in green) has been an underperformer or not.

Here is what I found:-

S&P 500 vs. Sensex

The S&P 500 index has not only outperformed the Sensex by a wide margin, but has eked out a 5% gain over the past year despite the economic slow down in the USA.

FTSE 100 vs. Sensex

The UK economy is in a bad shape with growth almost non-existent. Still, the FTSE 100 has outperformed the Sensex right through the past year – despite losing 5%.

DAX vs. Sensex

The German economy is stronger than the UK’s, but the DAX has lost 10% over the past year. Despite the steep fall in Aug ‘11, it managed to outperform the Sensex.

Bovespa vs. Sensex

India is no match for Brazil on the soccer field, but the Sensex has managed to outperform the Bovespa by more than 5% over the past year.

MERVAL vs. Sensex

The Argentine index has not gained during the past year, but has outperformed the Sensex by a wide margin.

Hang Seng vs. Sensex

Hang Seng is the only other major global index that has underperformed the Sensex, thanks to its steep fall over the last two months.

Jakarta Composite vs. Sensex

The Indonesian index has been one of the best performers in Asia, though it has made zero gains during the past year. It has significantly outperformed the Sensex.

KLCI vs. Sensex

The Malaysian index outperformed the Sensex throughout the past year, though it has lost about 3%.

The Sensex has indeed been an underperformer against major global indices – with the exception of the Bovespa and the Hang Seng. India’s economy is still growing in spite of the recent slow down due to high interest rates. When the turnaround comes, the index is likely to become an outperformer.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Oct 14 ‘11

In the analysis of the chart patterns of the Hang Seng, Straits Times and Malaysia KLCI indices two weeks back, the following conclusion was drawn:

‘All three Asian indices are deep within bear markets, and heading further south. Neither the fundamental nor the technical outlooks are rosy. Bide your time to enter at lower levels.’

All three indices did drop lower in the first week of Oct ‘11, but interestingly the Malaysia KLCI index reached a higher bottom, while its two Asian neighbours touched new lows.

Hang Seng Index Chart

In the previous post on Sep 30 ‘11, it was pointed out that the gap in the Hang Seng chart between 18700 and 18300 was a ‘measuring gap’ with a downward target of 16000. The index dropped to a new intra-day low of 16170 on Oct 4 ‘11. Since bear market targets tend to fall a little short (while bull market targets usually overshoot), the downward target of 16000 may be considered as met.

Note that the ROC, the RSI and the slow stochastic did not drop to new lows while the Hang Seng dropped lower. The positive divergences hinted at a rally that has not only propelled the index above its 20 day EMA, indicating short-term strength, but has closed the ‘measuring gap’ as well.

The receding volumes during this week is an indication that the rally is losing momentum. The technical indicators are giving mixed signals, hinting at a period of consolidation. The MACD is rising above its signal line, but remains negative. The ROC is positive and well above its rising 10 day MA, but has turned down. The RSI has climbed above its 50% level, which is a bullish sign. The slow stochastic has entered its overbought zone, from which has turned back quickly in the past four occasions.

Singapore Straits Times Index Chart

The Straits Times index dropped to a new low of 2522 on Oct 5 ‘11, but the MACD, the ROC and the RSI touched higher bottoms (marked by blue arrows). The positive divergences preceded a sharp rally that crossed the 20 day EMA as expected, and almost reached the falling 50 day EMA. A small ‘reversal day’ pattern on Oct 13 ‘11 supported by good volumes appears to have brought the rally to a temporary halt.

The Singapore index closed higher today, but made a lower top and lower bottom bar. Volumes were much lower as well. The technical indicators are looking bullish. The MACD is rising above its signal line in negative territory. The ROC has climbed into positive territory and is above its 10 day MA. The RSI has moved above the 50% level. The slow stochastic has entered its overbought zone. A test of resistance from the 50 day EMA may be in the offing.

Malaysia KLCI Index Chart

What had appeared to be a ‘dead cat bounce’ in the chart pattern of the Malaysia KLCI index turned into a sharp rally from the Sep ‘11 low of 1310, correcting almost 48% of its fall from the Jul ‘11 peak of 1597. The index crossed and closed above the 50 day EMA, which is a bullish sign, but the proximity to the 50% Fibonacci retracement level of 1453 may have encouraged the bears.

The index formed a ‘reversal day’ pattern today, which could mean the end of the three weeks long rally. The technical indicators are looking overbought, which is usually a precursor to a correction. The MACD is still negative, but has moved far above its rising signal line. The ROC rose too quickly above its 10 day MA, and its up move has stalled. The RSI has moved up almost vertically into its overbought zone. The slow stochastic is well inside its overbought zone.

Bottomline? All three Asian indices have risen sharply from their recent lows. Such sharp rallies are often seen in bear markets. As long as the indices trade below their falling 200 day EMAs, the bear markets will remain in force, and the strategy should be to sell the rallies. The first signal of a trend reversal will be the crossing of the 20 day EMA above the 50 day EMA. So keep a watch on the short-term and medium term moving averages.

Stock Index Chart Patterns – Hang Seng, Singapore Straits Times, Malaysia KLCI – Sep 30 ‘11

In the previous post on the chart patterns of Hang Seng, Straits Times and KLCI indices, it was observed that the index that had fallen the most (Hang Seng) had bounced up the highest; and the index that had fallen the least (Malaysia KLCI) had bounced up the least. The tables have been turned in the intervening three weeks. The one that bounced up the highest has fallen the hardest, and the one that bounced up the least has fallen the least. All three indices are deep inside bear markets, with no signs of a recovery.

Hang Seng Index Chart

The bears are using every rise to sell, and the Hang Seng index is sliding into the dark depths of a bear market. In the previous post, I had mentioned that the Aug 9 '11 intra-day low of 18868 would be tested and breached. The index fell much further - to an intra-day low of 17000 on Sep 26 '11. What is more ominous, is the formation of another big gap between 18700 and 18300.

If it is a 'measuring gap' - and it most probably is one - then the index can fall to 16000. Measuring gaps tend to occur at the half-way point of a down (or up) move. But if it is an 'exhaustion gap', then the index may form a bottom at current levels before starting an up move. I don't like betting on index movements because the odds don't exceed 50%. But if some one held a gun to my head, I would place a bet on the Hang Seng falling to 16000.

The technical indicators are quite bearish. The MACD is negative, and below its signal line. The ROC is trying to rise, but remains well inside negative territory. The RSI bounced off its oversold zone, but is turning down again. The slow stochastic has emerged from its oversold zone, but today's loss of 400 points (not shown in the chart) should snuff out any bullish hopes. The only silver lining is that three of the four technical indicators didn't fall lower with the index. The positive divergences may lead to a consolidation or a brief rally.

Singapore Straits Times Index Chart


The falling 20 day EMA has proved to be an insurmountable resistance for the Singapore Straits Times index chart. After an expected period of consolidation, the index moved down to test and breach the Aug 22 '11 intra-day low of 2681 A new intra-day low of 2627 was touched on Sep 26 '11.

Note that all four technical indicators reached higher lows, even though they are in bear territory. The combined positive divergences may trigger another rally that may take the index past the falling 20 day EMA. No need to feel elated. Bears will surely use the opportunity to sell.

Malaysia KLCI Index Chart

Malaysia's KLCI index chart pattern had been one of the most resilient among the Asian indices during the bear rampage across the region. But after the 'death cross' of the 50 day EMA below the 200 day EMA, the index fall has been almost vertical. The index is going through a 'dead-cat bounce' - the receding volumes is a clear indication - which will provide more opportunities for selling.

The technical indicators are bearish. The MACD is negative, and below its falling signal line. The ROC is also negative, though it has climbed up quite sharply. Both the RSI and the slow stochastic have emerged from their oversold zones, but are well below their 50% levels.

Bottomline? All three Asian indices are deep within bear markets, and heading further south. Neither the fundamental nor the technical outlooks are rosy. Bide your time to enter at lower levels.